In times of uncertainty like nowdays, investors should look for alternatives to get profitability. In this scenario, experts recommend starting looking beyond traditional assets and considering alternative management for our portfolio.
PwC compiles a series of data on global pension fund exposure to these kind of strategies, these data show that we have evolve from 7% in 1996 to 24% at present. It is estimated that by 2020 the annual growth will reach between 8% and 10%.
Why rely on alternative management today?
The objective of alternative management is dissociate itself from the results offered by the stock indices using different techniques to achieve profitability, regardless of the movements of the capital markets.
Traditional managers, in spite of the uncertainty of the markets, continue having as reference the stock indices. Their only way to obtain added value is through the appropriate selection of securities and around 50% are able to justify the commissions they apply. This implies that in the long run, most of the traditional managers are not able to achieve index performance. In addition, markets are highly sensitive to circumstantial changes.
Against this, from Altarius we opted for the diversification and the use of alternative strategies as a complementary source of profitability.
Test it before buying
Before deciding to include alternative management funds in our portfolio to diversify, we must consider two specific questions about the fund to be acquired:
Revise that the funds have provided positive returns in any market environment. To do this we must verify if the fund has generated positive profitability every year, with special attention in the negative years for the stock markets. This test helps to confirm the absolute performance character of the alternative fund.
Check the degree of diversification that the alternative fund can provide. A good idea to discover would be to take as reference a year in which equity and fixed income markets have suffered losses and compare with alternative fund results.
But if you want to get right with the alternative funds, the best way is to rely on professionals like Altarius to diversify your investment portfolio.