Market volatility is rearing its ugly head again, revealing the risks when riding a bull equity market rally. As investors rebalance their portfolios, consider alternative strategies that can better diversify away from traditional equity and debt exposures.
On the upcoming webcast, Smart Alternatives for Building Better Portfolios, Salvatore Bruno, Chief Investment Officer and Managing Director of IndexIQ, and John Davi, Founder and CIO of Astoria Portfolio Advisors, will discuss liquid alternative investments that may zig as markets zag.
For example, the IQ Hedge Multi-Strategy ETF (NYSEArca: QAI), the largest alternative strategy ETF on the market, provides a diversified mix of alternative strategies, including multiple hedge fund investment styles, such as long/short equity, global macro, market neutral, event-driven, fixed income arbitrage and emerging markets.
Additionally, investors can also select single styles, such as Index IQ Merger Arbitrage ETF (NYSEArca: MNA). MNA would capitalize on arbitrage opportunities through mergers and acquisitions activities.
Buoy an Investment Portfolio During Troubled Times
During periods of market selling in traditional assets, these types of liquid alternative strategies can experience lower drawdowns or even positive returns, which may help buoy an investment portfolio during troubled times.
Nevertheless, potential investors should be aware that these types of investments are not meant as growth strategies to generate outsized returns in investment portfolios. In reality, these strategies are doing exactly what they were made for: diminishing volatility. Consequently, in bullish market conditions, the strategies may underperform, but if the markets turn, alts can shine.
Due to the multitude of investment strategies available, advisors and clients should take the time to understand the products before adding them into a diversified portfolio. Advisors wouldn’t necessarily overweight alternative strategies in their investment portfolios, but they would add a small portion into these products, capitalizing on factors like diversification, low correlation, enhanced risk-adjusted profile, absolute returns, poor bond market outlook, investments that clients wouldn’t find themselves and enhanced yield.
Financial advisors who are interested in learning more about alternative investment strategies can register for the Thursday, May 17 webcast here.