Alternative Investments: A Shift From Stocks to Hedging Strategies

Alternative investments can be an important strategic addition to traditional portfolios. They’re designed for weathering a volatile market, generating attractive returns and providing all-important diversification. But that also means they’re not designed to outpace a rising market—like the one we’re in now that began in 2009. As market gains extend further, a growing number of investors seem to be concerned about the equity market and the appetite for alternative strategies is on the rise.

The alternative investment universe is broad; I believe there’s always opportunity to be found. As we extend into the later innings of the economic and business cycle, three areas seem well-suited to the environment:

  1. Equity long-short strategies, particularly those focused outside the U.S.
  2. Opportunistic credit strategies
  3. Strategies that hedge duration

Only one thing keeps me up at night. I address this “x factor” in the video above and share why I’m optimistic about alternative investments.

Alternative mutual funds often hold a variety of non-traditional investments and often employ more complex trading strategies than traditional mutual funds. Each of these alternative asset classes and investment strategies have unique risks, typically making them more suitable for investors with an above average tolerance for risk. Investors should fully understand the asset classes, investment strategies and their risks before investing.

Diversification does not assure a profit nor does it protect against loss of principal. 

The opinions expressed are those of Cleo Chang and are no guarantee of the future performance of any American Century Investments fund.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.