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Alternative Investments: The benchmarking challenge

  • ,  Head of Research |
  • 12 Jan 2023
  • Updated 18 Jan 2023

Appraising Liquid Alternatives for Diversification and Enhanced Risk-adjusted Returns

Even in a changing market regime, there are long-held investing mantras that still ring true. One example is diversification. Risk theory tells us that spreading our bets and choosing uncorrelated asset classes is the best way forward. But even traditional stock/bond portfolios have come under pressure in recent times. Whether the 60/40 portfolio can make a comeback is an open question, and many investors have cast their eyes on alternatives.

READ NOW: Alternative Investments: The benchmarking challenge (Special Report, 2023)

However, a criticism levelled at some alternative investments is that they can be illiquid. Additionally there has been a dearth of appropriate benchmarks in this sector, making passive replication and performance measurement difficult. Liquid alternative strategies may offer an answer to these concerns.

Alternative Investments

Alternative Investments: The benchmarking challenge (Special Report, 2022)

This Special Report reviews common liquid alternative strategies such as risk parity, alternative risk premia, and managed futures through a passive lens. Each strategy includes specifics on definition, strategy construction, and key risk/return characteristics.