Alternative strategies get some good press for being resilient in market downturns, but data from FE Analytics shows that, on average, they underperformed the S&P ASX 300 for the 12 months to 30 November 2018.
Natixis Investment Managers said alternatives strategies were in fact a disappointing area last year, predominantly due to advisers not taking advantage of strategies with the most diversification.
“There are many different strategies in alternatives, and advisers need to be aware of the behaviour of these strategies, which provide the most diversification, and when they work best,” said the firm.
“For example, equity long/short strategies can provide diversification to equity allocations, but being in reality more long than short, they will generally follow the direction of equity markets.”
On the other hand, according to Natixis, long/short managers that can take net short positions can make money in equity market downturns.
Data from FE Analytics shows the alternative sector returned, on average, -1.79 per cent for the 12 months to 30 November 2018, and while that’s a step up from the Australian equity sector, which returned -2.17 per cent, it’s still below the ASX 300 index, which returned -1.03 per cent.
But, while the index proved hard to beat, and alternatives may have not have shone that brightly, they were still more resilient to volatility than traditional asset classes.