Alternative investments can enhance overall returns, increase income and/or reduce risk in their portfolios. When we believe a client can benefit, we look to add alternative investments as a complement to the portfolio.
We maintain a preferred list of alternative investments and typically differentiate them as ‘growth alternatives’ or ‘income alternatives’.
In 2013, TriDelta Investment Counsel launched its own hedge fund, which was designed to deliver high income with broad diversification. Our view is that new investment asset classes are always worth reviewing. If we find an alternative asset class or strategy that we believe will be beneficial to our clients’ portfolios, we will incorporate it into our overall recommendations.
One common theme to alternative investments is that they often have low correlations to traditional investments such as stocks and bonds. This benefits portfolios by increasing diversification. Research has revealed that many large institutional funds such as pensions and private endowments have begun to allocate meaningful amounts of their portfolios to alternative investments such as hedge funds.
Investments in real estate, mortgages, hedge funds, infrastructure, private debt and equity, and the like, continue to grow as a percentage of overall assets for some of the biggest pension funds. They comprise of over 30% of the overall portfolio at pension plans, such as the Ontario Teacher’s Plan (OTTP), Harvard Endowment Fund and the Canadian Pension Plan Investment Board (CPPIB), which manages the funds for CPP payments.