A Simple Framework to Prepare for the Next Bear Market
Posted: Fri Sep 18, 2020 11:54 am
Anything here for those of you who suggest alternatives or modifications to the permanent portfolio or as part of a variable portfolio?
Vinny
A Simple Framework to Prepare for the Next Bear Market
The aging bull market should push advisors to protect client gains. Alternative strategies can help. Here are some, demystified.
https://www.thinkadvisor.com/2018/10/25 ... ar-market/
We include three types of more popular alternative strategies within this camp. Here’s a brief description of each type, and their correlation to equities (S&P 500) over the last 10 years:
Managed Futures: This strategy invests long and short across multiple asset classes, using quantitative signals to identify when an asset class is poised to rise or fall. The strategy’s ability to track different assets and take advantage of both rising and falling markets has led to a substantially different return profile from most other asset classes, and a correlation of -0.10 with equities.
Market Neutral Funds: These funds include a long portfolio of stocks or other assets expected to outperform and a short portfolio of securities expected to underperform. Near identical long and short exposure makes the returns less related to the overall stock market. As a group, market neutral funds have 0.34 correlation to equities.
Multicurrency Strategies: As the name suggests, this strategy invests in different currencies to capitalize on their relative strength. Traditionally, return streams are different from equity and fixed income markets. Over the last 10 years, the strategy has had a correlation of 0.48 to equities.
Vinny
A Simple Framework to Prepare for the Next Bear Market
The aging bull market should push advisors to protect client gains. Alternative strategies can help. Here are some, demystified.
https://www.thinkadvisor.com/2018/10/25 ... ar-market/
We include three types of more popular alternative strategies within this camp. Here’s a brief description of each type, and their correlation to equities (S&P 500) over the last 10 years:
Managed Futures: This strategy invests long and short across multiple asset classes, using quantitative signals to identify when an asset class is poised to rise or fall. The strategy’s ability to track different assets and take advantage of both rising and falling markets has led to a substantially different return profile from most other asset classes, and a correlation of -0.10 with equities.
Market Neutral Funds: These funds include a long portfolio of stocks or other assets expected to outperform and a short portfolio of securities expected to underperform. Near identical long and short exposure makes the returns less related to the overall stock market. As a group, market neutral funds have 0.34 correlation to equities.
Multicurrency Strategies: As the name suggests, this strategy invests in different currencies to capitalize on their relative strength. Traditionally, return streams are different from equity and fixed income markets. Over the last 10 years, the strategy has had a correlation of 0.48 to equities.