In this rapidly evolving market environment, it is not surprising that asset allocations for institutions are expected to follow suit and undergo many changes in the near term. Institutional investors worldwide are anticipating more asset allocation changes in the next one to two years than in 2012 and 2014, according to the Fidelity Global Institutional Investor Survey. Now in its fourteenth year, the survey indicates that 72% of institutional investors plan to increase their allocation of illiquid alternatives in 2017 and 2018.
Alternative investments can be used alone to address unique investment objectives, or together within a portfolio to complement other strategies that have different risk and return profiles. We believe that investing in alternatives can offer a range of benefits to investors, including the potential for uncorrelated returns, reduced volatility and, in some cases, additional tail risk protection. Investments in real estate and infrastructure also have the potential to generate sizable yield. In this paper, we will look at a variety of alternative investment strategies and the potential strengths they have when added to a diversified portfolio.