Why alternatives and why not hedge funds
Our approach to alternative investments stands out. We focus on asset classes and strategies with low correlation to the stock and bond markets.
Hedge funds often have hidden stock exposure and high fees. When markets drop, your diversification may vanish. Instead, we focus on investments that keep their low correlation when it matters most.
What we use
We use a variety of alternative investments including catastrophe bonds, private lending, managed futures, private real estate, and style premia among others.
We use these investments because their returns are driven by risks unrelated to stock and bond markets. Catastrophe bonds rely on natural disaster outcomes, not earnings season. Managed futures can do well when stocks struggle, because they can make money on market trends, even those that point downwards.
The role alternatives play in a portfolio
We include alternative investments in clients’ portfolios to serve two related goals: to attempt to help protect against large stock market declines and to seek returns above those offered by the bond market.
In a world where stocks are expensive and bond yields are modest, finding a third return stream that doesn’t simply mirror what stocks and bonds are doing has real value. Our alternative allocations are designed to fill that role by providing diversification that works when equity markets are falling, without the cost and opacity of traditional hedge fund structures.
These aren't for everyone
We’re honest: alternatives involve complexity and sometimes illiquidity. We explain this to our clients and ask that they trust the process. Certain investment strategies may take time to prove their worth.
For clients who accept their quirks, these investments help reduce risk and improve returns in ways that stocks or bonds can’t replicate on their own.
Interested in whether alternative investments belong in your portfolio?
Let's find out together.
Frequently Asked Questions
What is a catastrophe bond?
Catastrophe bonds (cat bonds) lose money when there are big natural disasters such as hurricanes or earthquakes, but those are not precipitated by economic recessions. Therefore, the returns on catastrophe bonds are independent of the forces that drive most other investments.
What are managed futures?
Managed futures funds follow trends, making money by buying or selling stocks, bonds, currencies, or commodities. They have historically done well during stock market downturns.
What percentage of a portfolio typically goes to alternatives?
It varies by client, but alternatives are typically 10% to 30% of the overall portfolio. The goal is meaningful diversification, not replacing stocks and bonds. The right allocation depends on your overall risk tolerance, liquidity needs, and comfort with less familiar investment types. We discuss this carefully with every client before making any allocation.
Disclaimer: Investing in securities involves a risk of loss. Past performance is never a guarantee of future returns.