Darcie Crowe on BNN: Why Are Alternatives Critical?
Kellyanne Yep - Mar 30, 2020
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Why is it critical to incorporate alternative strategies into your investment portfolios? Jim Gordon interviews Darcie Crowe for BNN Bloomberg and the Financial Post.
We are pleased to share Darcie’s recent feature on BNN and the Financial Post, and invite you to watch the replay below.
As globalization increases, we’ve seen public equities and fixed income become more correlated over time – therefore inadequately protecting your capital throughout downturns. Alternative investments, which exhibit limited or no correlation to traditional investments, can greatly assist in wealth preservation by providing a unique, uncorrelated return stream.
Our clients continue to benefit from the compelling opportunities within this asset class, which have proven their mettle amidst this current volatility:
Reduced Volatility and Increased Protection
We undertake an enhanced traditional approach to portfolio construction; implementing a significant allocation to non-traditional, alternative investments as a complement to high quality equity and fixed income names. These alternatives have limited correlation to their traditional counterparts within the portfolio, and are not limited to alternative credit, private debt, long/short equity, private real estate and arbitrage opportunities.
Additional Key Benefits:
- Reduced Drawdowns (Losses): The low correlation and additional diversification of alternatives may reduce losses within portfolios though market downturns and therefore lead to enhanced performance over the long-term. In simple terms, a drawdown is the loss experienced from the highest value of your portfolio to its lowest, over a period of time.
- Enhanced Risk Adjusted Returns: Given the unique characteristics of these assets, the risk adjusted return profile of your portfolio is greatly improved. A portfolio with alternative assets may achieve an equal return to a traditional portfolio over a period of time, but hold lower risk and therefore, a more preferable risk-adjusted return profile.
- Improved Investment Experience: By introducing uncorrelated assets, bringing down volatility and creating a more consistent return stream, the investor experience and commitment to your long-term investment strategy is significantly improved. This means investors may achieve their financial goals with greater certainty
Today, alternative investments play a key role in the portfolios of institutional investors and family offices (often referred to as the “smart money”) as they look to achieve more consistency in returns. The asset allocation of a present day family office is depicted above, with material allocations to private investments. BlackRock’s global head of alternative investments, Edwin Conway, recently stated that private market exposure of the firm’s institutional client base is already at 25% of their portfolios and is expected to increase to about 30% to 40%. By contrast, retail investors are significantly behind at just 3% to 4%.
The use of alternatives within portfolios can be extremely powerful in providing an opportunity to gain additional diversification, reduce risk and unlock potential to generate higher returns than a portfolio constrained to traditional investments. We would welcome the opportunity to discuss the attractive opportunity they represent.
Should you be interested in enhancing your traditional portfolio and capitalizing on the current market environment, we would be pleased to schedule a call and look forward to hearing from you.
With best wishes,
The team at Crowe Private Wealth.