6
Place in a Portfolio
Across the board, industry professionals (including academics, institutional investors, ultra and high net worth individuals, family offices, sovereign wealth funds, pensions, endowments, hedge fund managers) are in consensus when it comes to how the introduction/inclusion of alternative alternative assets and strategies would impact a portfolio, i.e. improve its risk–return profile.
In the real world and roughly nine months after the collapse of Lehman, I conducted a ‘by invitation’ survey at A SQUARE, which was designed to gauge the performance of these assets and strategies, and changes in the level of interest, attitudes and perception of investors towards alternative alternatives. Respondents were representative of a broad spectrum of asset allocators and financial market participants. The survey revealed that on a relative basis, alternative alternative assets and strategies were marked as those within the portfolio, that outperformed stock and bond allocations over 2008–Q1 2009.
Other findings from the survey included:
- Alternative alternative investments/strategies were associated with risk diversification, followed by de-correlation.
- As many as half the participants said they did not have a predefined percentage allocation to alternative alternatives, which was attributed to various reasons:
– Predefined allocations are based on artificial academic beliefs that do not work in the real world over the long term.
– The definition of ‘alternative alternatives’ ...
