In this video, Wells Fargo’s Brian Jacobsen looks at the “when and where” of alternative investments. As he observes, different alternative strategies tend to perform better or worse depending on the current market cycle and investing environment.
For example, equity-hedged and relative value strategies do well under directionless but choppy markets; while global macro outperforms when global and/or domestic policies are in flux. Event-driven, the fourth style Dr. Jacobsen considers, is more difficult to predict, and thus benefits from a dedicated manager or team of managers performing research and due diligence.
Indeed, Dr. Jacobsen recommends combining all four alternative strategies into a single portfolio managed by an expert, who can tactically allocate across the strategies to capitalize on opportunities. This is part of the “where,” and Dr. Jacobsen says investors may choose to implement alternatives either as a core portfolio holding, or as a satellite to existing core holdings, depending on their investment objectives and risk tolerance.
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