Why alternative investments are becoming more popular


Why alternative investments are becoming more popular

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With the right investment strategies alternative capital can have a significant positive impact on most investors’ overall portfolios, as Paul Schultz, CEO of Aon Benfield Securities, explains.

Traditionally, investors have looked to equities, bonds and cash instruments as places to put their money on the expectation that doing this will generate a return on their investment.

But in recent years, extended periods of very low interest rates around the world have left many investors with inadequate returns on their bonds and virtually no return on their cash investments. Rising volatility on equity markets has also left many of the more adventurous institutional investors bruised and disillusioned.

The malaise affecting these main asset classes has increasingly driven investors, especially long-term investors such as pension funds, to seek higher rates of return by deploying more of their capital in so-called alternative assets. Many of these alternatives not only offer the possibility of generating reasonable returns for investors, but perform in ways that are low-correlated with traditional instruments such as the stock market. When markets tumble, as was seen in the first weeks of 2016, alternative investments tend to remain unaffected—adding a much-needed additional layer of diversification to a portfolio.

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