Your Guide to Alternative Investing

Looking for alternative assets to add to your portfolio? Uncorrelated investments provide diversification and help boost returns and smooth losses

Emma Wall 12 December, 2016 | 10:15AM

Investing 101 suggests that a diversified portfolio can be built with three blocks; equities, bonds and cash. In certain market conditions stock prices rise, the teaching suggests, and bond prices fall, while in a different part of the cycle the reverse is true; uncorrelated assets provide diversification and help boost returns and smooth losses.

But monetary policy has distorted correlations, in times of market stress both bonds and equities fall together – take the market crash of summer 2015 for example, initially triggered by the Chinese stock market tumbling, but which spread across asset classes and geographies.

Multi-asset fund managers are increasingly looking to alternative assets to provide protection in these circumstances – investments removed from the headwinds and tailwinds that move global markets. Hedge fund managers have long employed a broader spectrum of assets and tools to meet their return targets and now these processes are entering the mainstream.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Emma Wall  is former Senior International Editor for Morningstar

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