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definition

Alternatives - investments targeting a source of return differentiated from traditional, long-only equity and bond market exposure.
                               
Liquid - ability to transact in a transparent regulated mutual fund generally offering daily liquidity.

fit-for-purpose

As a potential source of alpha: a complement to the core portfolio aiming to achieve desired investment outcomes.


As a hedge to a traditional asset allocation: seeks to insulate the overall portfolio against adverse market moves.

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  • Unconstrained investing - no benchmark, opportunistic asset allocation across both traditional and non-traditional strategies
  • Idiosyncratic performance drivers - lower sensitivity to general market moves
  • Alpha generation - aiming to generate returns uncorrelated to traditional markets
  • Increased diversification - through low beta with conventional markets
  • Risk mitigation - potential for lower volatility and downside protection
  • Regulated - UCITS regulatory oversight and safeguards
  • Liquidity - at least fortnightly; most funds offer daily liquidity
  • High transparency - clarity in underlying investments
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Absolute return seeking

  • No benchmark

Unique alpha generating opportunities independent of equity and bond returns

  • Reduced correlations when correlations in traditional asset classes are rising

Additional flexibility to long-only investments

  • Unconstrained, seeking both directional and non-directional investment opportunities

Diversification to traditional asset allocation

  • A complement: potential for lower volatility and downside mitigation

Shock absorbers during market stress

Addressing Investor Goals

Reaffirming investor’s needs, Pioneer Investments’ clients* identify their biggest portfolio gaps as follows:

 

  • Manage Drawdown Effectively (39%)
  • Generate Sufficient Return (34%)
  • Manage Volatility Effectively (17%)
  • Generate Sufficient Income (10%)

 

By adding diversified sources of return to traditional portfolios, investors may achieve higher levels of wealth accumulation over time.

 

Portfolios should be better equipped to achieve lower correlation with traditional asset classes, lower volatility and contain drawdown.

 

* Source: Pioneer Investments’ survey carried out at the 2016 ‘Solutions for Challenging Times’ conference. Over 100 professional asset allocators surveyed.

time-is-right

We are facing lower expected returns from equities and bonds, combined with a potential rise in volatility.


We need to consider a different way of investing that targets new sources of returns, downside mitigation, and volatility management.

Key differences with other available investment vehicles

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*EPM = Efficient Portfolio Management