Introducing alternatives like hedge funds and private market investments into a portfolio could help to reduce risk and may improve long-term returns although this is not guaranteed.
Today’s investment environment offers interesting investment opportunities for alternative managers with the skills, resources and experience to take advantage.
Policymakers in Europe and the UK have designed new investment vehicles that encourage investors to support the economic recovery by lending directly to businesses.
The Coronavirus pandemic has caused a severe economic downturn and the outlook remains uncertain. Although financial markets around the world have regained their poise, conditions remain volatile and the crisis has left many investors feeling uncertain about their portfolios and what to do next.
Whilst market movements may make you feel uneasy, it is important that you do not make any rash decisions. If you disinvest during a market downturn you might miss out on any positive market movements that follow.
A diversified portfolio combines traditional investments like equities and bonds with alternative assets such as hedge funds and private market investments, and should take into account your individual financial objectives and time horizon.
One of the main advantages of including carefully selected alternatives in a portfolio, is that they offer the potential to improve risk-adjusted returns.
Alternatives can reduce the volatility of performance because over time they have a low correlation with traditional investments. They also offer the potential for additional returns by providing exposure to different opportunities.
Despite the theoretical benefits, many private investors are asking important questions about whether now is the right time to invest in alternatives. To discuss further please contact your usual Brown Shipley adviser.
For illustrative purposes only – not drawn to scale. Source: Quintet, Markowitz¹
¹ Harry Markowitz was an economist renowned for his research on Modern Portfolio Theory. He received the Nobel Prize in Economics in 1990 for his work in this area.
For those clients who have access to My Brown Shipley you can check your portfolio valuation online. If you have any questions, please contact your usual Brown Shipley adviser.
Celine El Debs
Group Head of Alternatives
Group Chief Investment Officer
The information contained in this article is defined as non-independent research because it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research, including any prohibition on dealing ahead of the dissemination of this information.
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Investing in stocks either directly or indirectly carries investment risk. The value of equity based investments may go down as well as up over time due to factors such as, market volatility, interest rates, and general economic conditions.
Investing puts your capital at risk. Lending is subject to status.