The quest for diversification: Liquid alts opportunities
Alternative risk premia in practice
- Hedges: Linear pay offs using standard derivatives
- Tall Risk Hedges: Convex pay offs using volatility derivatives
Equity volatility: Harvesting yield in a minefield
Returns from selling one-month VIX futures to harvest volatility risk premium
Source: Bloomberg, BMO Global Asset Management, as of August 20, 2020. Past performance should not be seen as an indication of future performance.
Machine learning: A new hope
Multi-alternative risk premia
Tail-risk hedging: Magnifying returns when fear is unleashed
The balanced fund of the future likely includes liquid alts
The secular trend of falling interest rates is approaching its limit as global rates have converged at the zero floor or fallen outright below it. 60/40 investors are increasingly likely to use liquid alts to help offset the loss of yield from the fixed-income portion of their balanced portfolio.
Implementation of liquid alts has been helped by the modernization of investment regulations in most jurisdictions. What was once accessible only to high-net-worth investors is slowly becoming available to retail investors, though high-leverage strategies will likely remain the exception.
This material is intended for institutional/professional investors, the investments and investment strategies discussed are not suitable for, or applicable to every individual. Investing in alternative investments presents the opportunity for significant losses, including the possible loss of your total investment. Such strategies have the potential for heightened volatility and in general, are not suitable for all investors.
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