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