Uncorrelated Strategies: Preparing for the Ride Ahead
Overview
During up markets, like those of the last 10 years, good returns can lull investors into a sense of complacency. But what are their exposures and strategies if markets head down or go sideways? What are the perceived marketplace risks and what questions should they be asking? Which lessons from the past are relevant and which aren’t? We dove into the value of uncorrelated strategies, with a look at alternative investments, including private equity funds and hedge funds.
Insights and Key Takeaways
We all know the fundamental rule of investing is diversification. The more money that goes into any one area of a portfolio, generally the lower the returns. Diversification is especially critical in this Covid-19 era. Now more than ever families are looking for investments that can help them achieve the ideal asset allocation. Uncorrelated investment strategies can help.
By definition an uncorrelated investment strategy contains both liquid and private investments that should produce returns only loosely correlated with the public equity market. We typically label them diversifiers, or niche investments.