Evening Brief – 03.01.23

Alternative investments aren’t simply growing they are becoming a mainstream part of investment management. Two primary trends are responsible for this development: a shift in investor benchmarks from relative to absolute return and the convergence of traditional and alternative asset classes, investment managers and products.

While alternative investments on their own may have higher volatility than more traditional investments, particularly fixed income, they typically have low correlations to, or do not move in lockstep with, more traditional asset classes. Therefore, their inclusion in an investment portfolio tends to result in lower overall volatility.

Just as we are growing accustomed to new, hybrid lifestyles, investors need to embrace a hybrid model in a changing market environment. Facing moderating economic growth, higher inflation and low but rising interest rates, investors may find it increasingly difficult to generate stable income-driven returns and alpha through the public markets alone. Alternatives can deliver on both fronts.

Connect Money, in an email interview, asked David O’Brien, Senior Consultant at Asset Strategy Advisors, a Boston-based registered investment advisory firm, about his firm’s asset allocations and strategies for alternative investments. O’Brien also shared his views on the fixed income markets.