Alternative Strategies Increase Returns

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    Alternative strategies have increased the portfolio returns of institutions as well as reduced investment risk over the past 20 years, says a report from the Commonfund. ‘Alternatives Reality: What to Expect from Future Allocations’ shows private equity and venture capital have provided returns well above public market equities and hedge funds have provided alpha across market cycles and protected in down markets. Alternative strategies are now seen as mainstream by investors and, over the past 30 years, endowments have increased allocations to equities and decreased allocations to fixed income strategies. This is due, in part, to the fact investors have been adequately compensated with higher risk adjusted returns compared to traditional strategies. Institutions that allocate capital to alternatives exhibit higher performance in comparison to those that allocate solely to traditional assets. It says thoughtfully constructed portfolios including allocations to alternative investment strategies are well-positioned to continue to outperform the traditional 60/40 benchmark.