Displaying items by tag: liquid alts

For years, alternative investments were mainly the domain of institutional investors, with private individuals largely excluded from opportunities like hedge funds and private equity. The rise of fintech has changed this, offering wider access through platforms that enable everyday investors to participate in alternative investments. 

These platforms utilize technologies like AI, blockchain, and crowdfunding to lower barriers and provide more transparent, secure options. This democratization allows regular investors to diversify portfolios and tap into high-potential markets, like venture capital or cryptocurrency. 

However, the illiquidity and volatility of many alternative assets still pose risks for inexperienced investors. As fintech continues to evolve, it will further shape the future of alternative investments, but due diligence remains essential for success.

Finsum: There have been monumental innovations in fintech in the last decade, but perhaps the strongest is in the alternative investment space. 

The financial volatility of recent years has made it clear that traditional retirement strategies may no longer suffice. The old 60/40 portfolio split between stocks and bonds has proven inadequate, as demonstrated in 2022 when both asset classes declined significantly.

 Retirees now face unique challenges such as sequence of return risk and inflation, which require a more adaptive investment strategy. Alternative investments, like private equity and venture capital, can offer opportunities for diversification and potential outperformance over traditional assets. Meanwhile, alternative strategies, such as long/short equity and merger arbitrage, provide potential protection during market downturns. 

Despite their complexity and potential downsides, incorporating alternatives can help retirees achieve a more resilient portfolio that balances growth, income, and capital preservation.

Finsum: Moreover, stocks and bonds are experiencing increasingly high correlation in returns compared to the last four decades, which should draw more inflow into alternatives. 

As the stock market hovers near all-time highs, investors are seeking a balance between optimism and caution, with alternative ETFs gaining traction as a popular choice for risk management and income generation. 

The latest data reveals that while U.S. equity and fixed-income ETFs lead in demand, alternatives ETFs are growing rapidly, reflecting a shift toward more diversified and protective strategies. These funds offer exposure beyond traditional stocks and bonds, incorporating elements like commodities, digital assets, and derivatives to manage risk and generate returns. 

Notably, products like the Global X Nasdaq 100 Tail Risk ETF and Fidelity's options-based portfolios are attracting attention for their innovative approaches to downside protection and income. The appeal of alternatives ETFs lies in their simplicity and accessibility, allowing even complex strategies to become core components of investor portfolios.

Finsum: Most of the time the downside of alts is the liquidity component, being able to use ETFs is a great way to counteract this. 

Family offices are pivoting from conventional asset allocations towards a heavier focus on alternative investments like private equity, real estate, and venture capital. J.P. Morgan's recent report indicates that nearly half of these portfolios now consist of alternative assets, with larger family offices taking the lead in this shift. 

This approach is driven by the desire for higher returns, reduced volatility, and better alignment with long-term wealth preservation and growth goals. These offices are capitalizing on their ability to invest in illiquid assets, which offer the potential for higher returns over time.

 By engaging more directly in private companies, family offices are leveraging their entrepreneurial expertise to achieve greater alignment with their wealth preservation objectives. While traditional public markets still hold a portion of these portfolios, the emphasis is clearly shifting towards alternatives that can better meet the complex, multi-generational needs of these families.

Finsum: With macro volatility looming alts could offer more risk cover and should be heavily considered. 

With clients pulling an estimated $130 billion in assets from Janus Henderson since 2017, the fund firm’s new boss is looking to revive the company by leaning into active management and pushing into alternative investments such as hedge funds and private credit. Ali Dibadj, who took over as CEO in June, acknowledged the firm’s difficulties and laid out a turnaround strategy, which includes pushing into some of the most competitive areas of the market to stop the bleeding. A committee of 40 senior staff members met for months to understand what clients want and then created a revival strategy. At the root of the plan is a bet on active management. The firm believes that active management can bring the best returns to investors. In addition to active funds, Janus is looking to focus on liquid alternatives, for which it currently has $20 billion under management. While the division hasn't received much attention, it houses several hedge funds. Last year, the unit had net inflows of $2 billion into products including multi-strategy hedge funds and equity- and commodity-enhanced index funds. Dibadj is also looking into illiquid alternatives. The firm is considering using private credit to augment its fixed-income unit and products tied to mortgage-backed and high-yield securities. Dibadj said the “move stems from client demand for such products.”

Finsum:After seeing $130 billion pulled from its funds, new Janus Henderson CEO Ali Dibadj is looking to stem the bleeding by betting on active management and moving into alternatives such as liquid alternatives and private credit.