A Better Alternative For Diversified Alternatives

By Todd Shriber via Iris.xyz

Alternative investments are generally defined as non-traditional assets, meaning the usual fare of stocks and bonds do not dwell in the alternatives space. Historically, alternatives sport low correlations to equity and fixed income assets, meaning alternatives can play an important role in adding diversity to investment portfolios.

The alternatives space includes strategies such as commodities, hedge funds, private equity and real estate, among other assets. Previously, alternative investments were a territory reserved for institutional or high net worth accredited investors, but exchange traded funds (ETFs) are increasing the accessibility of alternative strategies.

The JPMorgan Diversified Alternatives ETF (JPHF) brings a diverse approach to alternative and hedge fund strategies. Strategy diversification is a cornerstone of JPHF’s methodology. Focusing on diversification can reduce volatility and potentially boost long-term, total returns. Historical data suggest there are clear benefits in diversified hedge fund strategies.

In evaluating hedge strategies, some novice investors may be apt to ignore the fact that a strategy that proves efficacious one year can be a laggard the following year. This is a scenario similar to factor investing, one that underscores the utility of multi-factor ETFs. For example, growth stocks could be hot in a particular year, but the following year could see market participants favor low volatility, quality or value stocks while eschewing growth.

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