Successfully Navigate the Deep End of the Market Cycle With Liquid Alts

By Cynthia Crandall via

Investors have been fortunate to experience one of the longest bull markets on record. However, the recent stock-market surge—manifested by the Dow Jones Industrial Average’s record close above 22,000 points over the summer and the S&P 500 surpassing 2,500 points earlier this month has caused many to question whether or not valuations are stretched. This development, along with expectations of additional interest-rate increases going forward, has cast a favorable light on the downside protection properties of alternative investments.

Liquid alternatives, which provide access to alternative investment strategies in a mutual fund structure, have had positive returns during the most recent bull market over the past eight years, though returns have been muted as compared to long-only products. As a result, some investors and advisors are wary of this asset class. However, while some liquid-alternative strategies may be complicated to understand, there is no reason to be frightened of liquid alternatives as a whole, as they can be a great diversifier in a multi-asset class portfolio and potentially reduce client drawdowns.

Here are three key points to keep in mind about liquid alternatives:

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