Displaying items by tag: alternative assets

Until a couple of decades ago, investors had few options when it came to asset classes. Since then, there has been an increase in the number of investable asset classes including REITs, commodities, currencies, etc. Yet so many of these have failed to provide sufficient diversification, especially during down markets.

Investors should consider fixed annuities as they offer capital protection guaranteed returns, and income regardless of market conditions. Thus, they are a way to generate income during retirement and also increase the resilience of portfolios. 

Unlike fixed income, fixed annuities do not fluctuate in value depending on interest rates or other factors. Fixed annuities always have a positive, guaranteed return. When evaluating their portfolios, investors should consider market risk, credit risk, longevity risk, and liquidity risk. 

A fixed annuity reduces a portfolio’s market risk due to there being a guaranteed return and no risk of loss of principal. It also leads to lower credit risk given that annuity providers have superior credit ratings. Longevity risk is also reduced given that annuities provide payments for life. There is a tradeoff in terms of liquidity risk as money invested in an annuity is not easily accessible.

Finsum: Fixed annuities can lead to more resilient portfolios. Although there is a tradeoff in terms of liquidity, it can reduce a portfolios’ market, credit, and longevity risks. 

(New York)

Everyone knows mutual funds have been on the decline and ETFs on the rise as active management gives way to the rise of passives. However, new data throws a wrench into that narrative—hedge funds are surging in popularity. Hedge funds now account for 28% of all alternative asset demands among investors, just one point shy of private equity, and way up from 12% a year ago. The catch is that hedge funds don’t really look like themselves anymore, with new fund structures, such as separately managed accounts and lower fees, that make them more useful for investors. Co-investing is another big growth area, where major investors invest alongside hedge funds in specific deals.

FINSUM: So hedge funds have surged in popularity, but they are not hedge funds, in the same sense, as before. Further, fees are down, with the average being a management fee of 1.45% and a performance fee of 17%.