Alternatives have always been a decent hedge for stocks and bonds because of their low correlation in returns, but they are entering a goldilocks moment according to Cerulli Associates. According to advisors in their survey, there is a substantial increase in boosting exposure to alternatives and that will only grow over the next two years. The biggest reason advisors are sighting for shifting their client’s portfolio’s into alternatives is to reduce exposure to public markets. Advisors said they began to transition to alts during the ultra-low interest rates because a strong anchor was needed in the portfolio but was independent of interest rates. The most popular alts for advisors have been liquid alt mutual funds and ETFs which present hedge fund-esque strategies to individual investors.
Finsum: There has been a boom of options for alts in the last decade, and these options should really be considered as volatility hedges for advisors.