Once the exclusive domain of institutional and high-net-worth investors, alternative investments have become increasingly accessible to more investors across Canada. The demand for liquid alternatives is expected to flourish over the next decade, evolving the way we view portfolio construction.
Liquid alternatives combine the liquidity and transparency of mutual funds with much of the investment flexibility of hedge funds. Because they rely on alternative sources of returns, liquid alternatives offer investors the potential for enhanced diversification, decreased volatility, and attractive risk-adjusted returns – independent of traditional stock and bond markets.
With the potential for lower correlation to stocks and bonds, alternative asset strategies can increase portfolio diversification.
Because they don’t move in tandem with stock and bond markets, alternative strategies can help mitigate risk in times of volatility and potentially enhance long-term risk-adjusted returns.
Many alternative investments seek to deliver returns via trading strategies outside the “buy and hold” approach. They can complement existing holdings and provide a set of tools.