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November 17, 2011 at 08:00 PM
When it comes to alternative investments, we’ve seen a lot of tumult and upheaval over the past few years. The role of these investments in the financial crisis of 2008-2009 is well known, and in many quarters, alternative investments are still tainted and held in disrepute.
For today’s financial advisor, it’s not necessarily a case of passing judgment on this type of investment vehicle. Rather, it’s a matter of processing our collective knowledge of how the markets reacted in the past, reappraising opportunities and risks, and where appropriate, incorporating alternative investments into investors’ portfolios. The fact is, even though the popularity of alternative investments declined after the financial meltdown, they have started to make a comeback—and high-net-worth investors are once again exploring how they fit into a forward-thinking investment strategy.
After all, depending on an investor’s objectives, liquidity concerns, level of sophistication, and timeframes—alternative investments may make a lot of sense. They can add great value and diversification to a well-constructed high-net-worth portfolio. To this way of thinking, there’s no sense in throwing the baby out with the bathwater.
So Many Products, So Many Sources of Data
Until the crisis of 2008-2009, the primary vehicle for alternative investment strategies were LPs (limited partnerships), also known as hedge funds. However, circumstances have changed since that was the case. Certainly, with the resurgence, direct investment in LPs is still strong. But now, guided by advisors like you, investors are often opting for mutual funds or registered products to fulfill their alternative investment strategies. So…instead of monies going into multi-strategy funds of funds (FoF), they end up in a more liquid, more highly-regulated vehicle—the trusted money market fund.
