This handbook attempts to strip away some of the mystery around farmland and outline the key aspects of it as an asset class, its management, the key considerations for investors and, perhaps most important of all, the vital questions any good farmland investment advisor must be able to answer satisfactorily.
New research shows flexible managers, or those who can invest in any equity category, delivered higher returns than their benchmark and higher returns than the aggregated performance of style box managers, or those who invest only in a particular equity category. The median flexible manager outperformed the benchmark by 3.2% annualized and the median style box manager by 1.4% annualized.
Companies that are responsive to the changing economic, social and environmental landscape, brought about by trends related to climate change, will create opportunities (that will not come without challenges) to grow their businesses and, in turn, create wealth for their stakeholders.
Direct investment in private companies can deliver returns far exceeding those of private equity and other asset classes while also providing attractive diversification and increased control. The potential for outsize returns, however, comes with increased risk, meaning investors must carefully assess the various financial, organizational and managerial risks involved in this type of investment.
Four basic hedging techniques – long/short, covered call, buy/write indexing and index put options – represent varying levels of risk but, used appropriately, may reduce portfolio volatility and smooth overall returns. Defensive hedging, techniques designed to protect against loss, may even be well-suited for cautious or conservative investors.
Structured notes essentially replicate two types of financial instruments: zero-coupon bond and option(s). As a result, in the creation of structured notes, such financial instruments, their costs and several other factors contribute to the overall pricing of the notes.
One of the newest types of funds specializes in replicating the beta of hedge funds, a traditionally non-correlated asset class. By seeking to replicate the beta of the broad universe of hedge funds, these funds can bring a level of non-correlated returns to any portfolio allocation.
Post-crisis core portfolios may benefit from some revisions to traditional asset allocation. Each potential component of the new core (hedged equity, global fixed income and risk-managed alternatives) includes an enhancement that may offer greater risk management better suited to today's environment.
When stocks are volatile and bonds offer historically low yields, investors may seek to generate positive returns by investing in assets that are either driving inflation or offer protection during turbulent economic times. These real assets have historically outperformed stocks and bonds during periods of accelerating inflation and provided additional diversification for investors seeking to control portfolio volatility.
Once an initial portfolio has been constructed, it is critical that the asset allocation be monitored and rebalanced in a systematic and disciplined manner. Systematic rebalancing not only helps maintain a consistent and appropriate level of risk but, in many cases, also may enhance the return of a portfolio.