Alternative investments*

Alternative investments tend to carry a higher risk level, and some strategies may require a minimum level of income or assets and a minimum investment threshold. Because of this, alternative investments are not suitable for all investors.

Hedge funds use a variety of investment techniques, including traditional stock picking and computer-driven methods based on large amounts of data, such as statistical arbitrage or systematic trend-following.

While some hedge funds are looking to deliver outsized returns along with elevated risk, others are much more conservative, seeking to deliver more modest returns with lower investment risk.

Conventional ways of investing generally don’t have access to the sophisticated investment techniques hedge fund managers employ, as well as many of the instruments they use such as swaps and other derivative contracts. These characteristics can make hedge funds an alternative source of portfolio diversification.

• Private debt can provide a compelling and meaningful opportunity set for investors who are qualified to participate because there’s a larger investable universe of private companies seeking debt financing than public loan funds or individual bonds.
• Private debt can have a structural advantage, meaning the loans that managers make usually have a contractual floating rate, various lender protections, and sometimes an equity component to capture the upside potential of the borrower, all of which give the asset class unique return characteristics.
• Private debt can offer portfolio diversification, attractive current income, lower volatility, capital preservation, and downside protection versus other investment vehicles.

• Investing in private debt typically requires that investors meet certain qualifications, such as a high net worth, and experience in investing. Additionally, private debt funds often require very high minimum investments.
• Unlike bonds or loan funds on an exchange, private investments aren't priced daily. This can help reduce the extent of overall portfolio swings that investors experience.
• Because most private debt investments are illiquid and cannot easily be sold for cash, they can tie up a great deal of money for a lengthy period of time.
• Due to the lack of a reliable index or even observable market prices, it can be difficult for investors to make informed decisions about individual options. We recommend that investors work with an advisor when exploring this asset class.

• We believe private equity can provide a compelling and meaningful opportunity set for investors who are qualified to participate, as there’s a larger universe of private investable companies available compared with public stocks. Private equity historically has delivered higher returns than public markets⁵.
• Private equity investors may receive a premium in excess of public market returns because the investment cannot easily be sold quickly for cash.
• Including private equity in investment portfolios can provide diversification benefits resulting in an improved risk-reward profile. Because of the unique characteristics of private equity investing, skilled manager research and due diligence are essential to achieving desired outcomes.
• When constructing investment portfolios, the private equity asset class also offers diversification benefits. Even though investing in private equity can be risky, adding an allocation to portfolios may help to reduce the overall price risk of those portfolios while maintaining or increasing the expected return.

• Investing in private equity typically requires that investors meet certain qualifications, such as a high net worth, and experience in investing. Additionally, private equity funds often require very high minimum investments.
• Unlike stocks on an exchange, private investments aren't priced daily. This can help reduce the extent of overall portfolio swings that investors experience.
• Private equity investments are illiquid and cannot easily be sold for cash quickly. They can tie up a great deal of money for a lengthy period of time.
• Due to the lack of a reliable index or even observable market prices, it can be difficult for investors to make informed decisions about individual options. We recommend that investors work with an advisor when exploring this asset class.