Alternative investments highlights

Hedge Funds

  • Over a full market cycle, we believe hedge funds can help decrease risk and improve diversification.
  • At this point in the cycle, we prefer strategies like Relative Value and Macro that can help reduce volatility by being less correlated to risky assets.
  • Non-directional strategies such as Convertible Arbitrage, Merger Arbitrage, and even Long/Short Credit can provide diversification.
  • Corporate deal activity continues to track to historical levels in 2021, fueled by large amounts of dry powder in both corporate coffers and Private Equity portfolios.

Private Capital

  • Large buyout valuations remain elevated, with better opportunities in middle-market and small buyout strategies.
  • We are still constructive on niche Private Equity strategies, such as those focused on venture and growth equity.
  • Private Debt strategies focused on distressed or special situations are less attractive as credit spreads have tightened and distressed opportunities have declined. However, we still anticipate opportunities for specialized Direct Lending strategies.
  • Private real assets have historically performed well over a full market cycle. Our view on Private Real Estate is becoming more positive over the cyclical time frame.

Alternative investments, such as hedge funds and private equity/private debt funds, are not appropriate for all investors and are only open to accredited or qualified investors within the meaning of the U.S. securities laws. They are speculative and involve a high degree of risk that is appropriate only for those investors who have the financial sophistication and expertise to evaluate the merits and risks of an investment in a fund and for which the fund does not represent a complete investment program. While investors may potentially benefit from the ability of alternative investments to potentially improve the risk/reward profiles of their portfolios, the investments themselves can carry significant risks. There may be no secondary market for alternative investment interests, and transferability may be limited or even prohibited. Hedge fund strategies, such as Equity Hedge, Event Driven, Macro, and Relative Value, may expose investors to risks such as short selling, leverage, counterparty, liquidity, volatility, the use of derivative instruments, and other significant risks.