The challenges of alternatives in multi-asset funds

MULTI-ASSET

Nick Spencer, director, client strategy and research and Derek Williams, director, private real estate at Russell Investments, consider the challenges of integrating alternative investments into a multi-asset portfolio.

Investors look to alternatives in a multi-asset portfolio for their contribution to returns and ability to diversify. However, allocating to alternatives is a challenge as the very name means they are not well defined – alternatives simply means ‘other’. This lack of definition means managers are also unclear on how they will behave.  What is observed instead is blurred boundaries and overlaps between alternatives and the traditional asset classes. As observed throughout the 2000s, and abundantly in 2008, asset classes have become far more inter-connected and correlations have risen. ...