“[Alternative Investments] are necessary to help manage risk in a portfolio.”– Ed Butowsky, Managing Partner of Chapwood Investments
3 Reasons Alternative Investments Could Be a Huge Benefit to Your Portfolio
Most investors own several different types of holdings, but what they may not realize is their holdings increase/decrease at the same time, negating the benefits of having diversification.
In this chart, the green line represents the correlation of a 60/40 portfolio. One must be careful to have their portfolio positioned in a way that will constantly be going up and down in drastic ways. This could potentially damage compounding and future earnings.
Source: Visual Capitalist, May 2023. “Reimagining the 60/40 Portfolio for Today’s Market.”
There is an opportunity that alt. investments like hedge funds, venture capital, and private equity can produce similar or greater returns at lower annualized volatility.
Source: “Guide to Alternatives.” 1Q 2023, J.P Morgan Asset Management.
Hedge funds have provided downside protection during periods of market stress, circled above. During most of the periods of acute market stress over the last thirty years, hedge fund correlation to a 60/40 stock-bond portfolio has fallen to zero or below.
Source: J.P.Morgan Asset Management, 2023. “Guide to Asset Management.”
While alternative investments continue to grow in popularity, the marketplace remains fragmented, and opportunities are often difficult to access. It will become crucial for investors interested to be selective on managers of alternative & private investments.
We recommend reaching out today to learn more about partnerships we have in place to provide retail investors access to some of the world’s best funds.
Email Jordan McFarland at email@example.com to learn more.
Private investments are subject to special risks. Individuals must meet specific suitability standards before investing. This information does not constitute an offer to sell or a solicitation of an offer to buy. As a reminder, hedge funds (or funds of hedge funds), private equity funds, and real estate funds often engage in leveraging and other speculative investment practices that may increase the risk of investment loss. These investments can be highly illiquid and are not required to provide periodic pricing or valuation information to investors and may involve complex tax structures and delays in distributing important tax information. These investments are not subject to the same regulatory requirements as mutual funds and often charge high fees. Further, any number of conflicts of interest may exist in the context of the management and/or operation of any such fund. For complete information, please refer to the applicable offering memorandum.
Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by a prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested.
Diversification does not guarantee a profit or protect against a loss in a declining market. It is amethod used to help manage investment risk.
Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, the performance of indices does not account for any fees, commissions, or other expenses that would be incurred. Returns do not include reinvested dividends.
The Standard & Poor’s 500 (S&P 500) Index is a free-float weighted index that tracks the 500 most widely held stocks on the NYSE or NASDAQ and is representative of the stock market in general. It is a market value weighted index with each stock’s weight in the index proportionate to its market value.
Interests are only being offered to institutional investors as well as persons who qualify as accredited investors under the Securities Act, and a Qualified Purchaser as defined in Section 2(a)(51)(A) under the Company Act or an eligible employee of the management company. This presentation does not constitute an offer to sell or a solicitation of an offer to buy Interests in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. There will not be any public market for the Interests.