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Use select charts from the Guide to the Markets to engage in portfolio discussions.

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Alternative strategies

Alternatives have long been part of institutional investment portfolios, with the aim of adding diversification, dampening volatility and/or enhancing returns. Recent industry developments now mean that retail investors can access more of these strategies. This could prove helpful in a world where experts expect lower returns and higher correlation to traditional asset classes.

Economic Expansions and Recessions
Diversification works because not all asset classes move together
 
  • Alternative assets are generally those that fall outside the traditional asset classes of stocks, bonds and cash.
  • Some popular alternative asset classes and strategies include real estate, commodities, hedge funds and private equity.
  • In general, these asset classes tend not to move in lockstep with traditional asset classes (i.e., they have low correlations to stocks and bonds), which is reflected in the correlation matrix. Their lack of correlation is what makes them good diversifiers.
Discussion Slides
Correlations and volatility
Alternative strategies
Alternative asset class returns

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