Why investors plan to increase their exposure to liquid alternatives in 2017

20-Dec-2016

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Investors have already started making their plans for 2017. As far as predictions go, numerous changes are waited to take place in the industry. Among these, a serious increase in exposure to liquid alternatives has already become a reality. Let’s see why investors plan this and how it will affect their future business.

Liquid alternative investments: diversification and downside protection

For those who might not be well-informed about liquid alternative investments, we should mention the fact that these are either exchange traded funds or mutual ones. Their aim is to provide useful portfolio diversification as well as the necessary downside protection to alternative strategies that have also become important in the investment industry.

The selling point in their case is represented by their liquidity. This means that this kind of investments can be purchased and sold every day which differentiates them from traditional investment alternatives that only feature quarterly or monthly type of liquidity. Moreover, another important feature in their case is that lower minimum investments are required. Therefore, investors who plan to increase their exposure to liquid alternatives in 2017 will no longer have to pass net worth or certain income requirements to invest at this level.

Although numerous critics have shown their reservation in terms of effectiveness ensured by liquid investments, others consider these as valuable innovations. Therefore, most investors have included these into their future investment plans. They aim at creating strategies employed by effective hedge funds within reach of successful retail investors.

The plan to achieve superior risk-adjusted financial returns through improved portfolios

Another reason why investors plan to increase their exposure to liquid alternatives next year is represented by their overall plan to achieve superior risk-adjusted financial returns through improved portfolios. The value of such investments is more and more recognized by professional investment advisers looking to overcome limitations and bring innovation into the future.

The fundamental way of rethinking the proper balance between risks and financial returns is also at the base of such innovative exposure plans. Apart from the long-term ambitions of generating serious incomes or business capital growth, investors have also become more aware and really interested in the importance of other important factors related to such investments. The most valuable ones to mention at this stage are genuine diversification, capital preservation and downside protection.

Furthermore, you should know that liquid alternative investments aim at generating an absolute type of return thus have the ability to take short and long-term positions. Another advantage in their case is represented by the access ensured for those who adopt these to traditional alternative asset classes featuring regular dealing options and improved overall liquidity.

Important features that lead to changes in the overall investment plan of 2017

The way in which liquid alternatives are structured is in a mutual fund format. This means that their benefits are the ones associated with this format plus extra ones that come from their unique value of representation. Greater transparency needs to be mentioned here as well as an added reason why investors increase their exposure to such innovative strategies. Minimum investment levels also play an important role in this case as well as the effective concentration limits and the leverage featured by liquid investment alternatives.

Moreover, specialists in the industry also place value on the possibility of enhancing risk-adjusted returns of balanced portfolios through such investments. Genuine diversification is more than necessary for investors and the good news is that it can be achieved through liquid alternatives. Also, attention is given in this case to other valuable features ensured by these options like reduced volatility as well as important decorrelation characteristics. Downside protection is offered to investors as well which makes them prepared to face a distressed investment market.

Overall, 2017 seems to be the year of diversification in the field of investments. Innovative strategies are required to be adopted for maintaining a well-balanced portfolio that might ensure high financial returns. A shift in focus will be easily observed next year and new methods shall pave the way to success in this field. Those relying on valuable options like Tignanello wine and other assets they have included in their portfolio will achieve the desired incomes this way.

 

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