The Evolution of Alternatives

What is an Alternative?

Today there is no universally accepted definition of alternative investments. The types of assets in this category have evolved over time. In fact, during the 1980s, the industry recognized U.S. small caps and international stocks as emerging classes under the alternative category. Now these classes are considered mainstream.

Timeline of alternatives definitions from pre-1980 to present day

We define alternatives to include both alternative asset classes and alternative strategies, and each has a distinct role within a portfolio.

 

Alternative Asset Classes

Characteristics

  • Typically long-only
  • Returns driven by unique supply/demand dynamics
  • Can be riskier and more volatile than traditional assets(i.e. stocks, bonds, cash equivalents)

Examples

Alternative Strategies

Characteristics

  • Aims for lower volatility than equities
  • Designed for lower correlation to traditional asset classes
  • Strives for lower beta than equities 
  • Intended for lower sensitivity to interest rate moves than fixed-income

Examples

Considerations for Allocating to Alternatives

When adding alternatives to a portfolio, the allocation source matters. These tips can help you determine where to reduce other allocations in favor of liquid alternatives.

Finding Income in a Low-Yield World

Alternatives Portfolio Manager Hitesh Patel explores how his team is finding yield outside of traditional investment markets.

Alternative Income in a Bull Market

Head of Investment Solutions Cleo Chang explains our alternatives team’s active approach in one of the longest bull markets on record.