Alternative investments are any non-traditional investment (not stock, bond or cash) or a strategy specific investment focused on a predetermined return stream. Good examples of alternative investments include: hedged equity and fixed income investments, real estate, commodity related or hard assets, private equity, currencies and volatility strategies. These types of investments generally require deeper levels of due diligence that includes strategy optimization, liquidity provisions, manager access, expenses, taxation, credit exposure and leverage analysis.
Many of the alternative investments that we utilize carry risk characteristics similar to corporate bonds but have the capacity to outperform in low interest rate environments. These investments allow us to move between fixed income and equity from both a risk and return perspective. Proper manager selection allows us to hedge macro risks and decrease correlation among asset classes.