Having learned a hard lesson from the 2007-2009 market downturn, financial professionals are tempering future risk by diversifying portfolios with non-correlated alternative investments.
Yesterday’s “sensible” blend of bonds, equities and cash isn’t necessarily considered a well-diversified portfolio by financial advisors today. Given the unexpected correlation of equity and bond markets to the 2007-2009 downturn, many advisors began in earnest to look toward alternative investments that would diversify client retirement portfolios, according to PwC’s Asset & Wealth Management Revolution report. In fact, the report indicates that alternative investments are expected to surpass $21 trillion by 2025 and reach 15% of global assets under management.
In addition to tempering risk of a market downturn, Equity Institutional has identified four important ways that alts can help optimize a portfolio, including varying liquidity exposures and improving risk-adjusted return. The bottom line is that many investors are looking for portfolios that can weather volatility, compound wealth and fund specific goals.