Investors can now access multi-strategy alternative strategies once catered toward institutional investors through exchange traded funds to diminish market volatility and mitigate potential dips in traditional asset classes.
On the recent webcast, Liquid Alternatives: Bridging the Gap for Retail Investors, John G. Feyerer, V.P. of Product Management for Invesco PowerShares, argues that alternative investments offer uncorrelated returns to potentially enhance a portfolio and help diminish volatility. The majority of financial advisors are seeking ways to manage risk going forward. [Alternative ETF Strategies To Reduce Portfolio Risk]
“A closer look at risk/return reveals that some alternatives have served as return-enhancers and others as risk reducers,” Feyerer said.
Traditionally, these alts strategies have been limited to institutional class investors due to the factors like liquidity, tax efficiency, transparency, high cost and minimum investments. However, the ETF wrapper is a democratizing factor.
“Vehicles such as ETFs break down barriers, representing a transformative change for asset allocation and portfolio construction,” Feyerer added.
For instance, the actively managed PowerShares Multi-Strategy Alternative Portfolio (NasdaqGM: LALT) tries to provide positive total return with a low correlation to broad securities and can be used as a fixed-income substitute. LALT holds a combination of equities, along with financial future contracts, forward currency contracts and other securities. [A Liquid Alts ETF Idea for the Second Half]