Are alternative funds fulfilling their promises?

To answer these questions, Picton Mahoney Asset Management, the country’s leading provider of alternative funds, asked investment advisers to rank the reasons they used alternative funds. This allowed the firm to establish a qualitative rating system for the various alternative liquid strategies that the firm details in a white paper, The best and the rest: measuring the effectiveness of alternative strategieswhich she has just published.

RISK REDUCTION

Risk reduction is one of the main reasons why advisors use alternative funds.

With the decline of core bonds, the tool they relied on to reduce portfolio risk, investment advisors have turned to alternative investments that currently help investors achieve their goals with greater certainty.

According to Picton Mahoney, in standalone risk assessment, limited risk control and portfolio risk mitigation, it is the neutral market category (Market Neutral Alternative) that showed the most attractive risk reduction characteristics.

DIVERSIFICATION

This is another good reason identified by advisers to favor alternative funds.

In the first quarter of 2022, diversification showed its value as strategies such as government bonds, credit and global equity all saw significant declines, while some alternative assets, such as raw materials, and alternative strategies, such as the absolute return and strategies of the credit event, generated. positive returns.

Again, according to the assessment of Picton Mahoney, it is the neutral category of the market that shows the most attractive diversification, with high scores in the categories of diversification of fixed income, shares and the risk explained by the factor model.

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