You have heard the expression “out with the old and in with the new.” Well, these days it seems to be taking on it’s own meaning, particularly with regards to traditional investments versus non-traditional investing options. Many investment firms, particularly in the United States, have lost patience with the old traditional methods, as they have repeatedly failed in the most part; to deliver results to their bottom-line. In many instances, investors have been left with no choice but to seek alternatives that are not only less risky, but also have the ability to deliver strong returns in a difficult financial climate.
“Years of market instability have U.S. institutional investors on edge … In their view, markets are driven more by economic and political events than by fundamentals. As a result, decisions are often made for defensive reasons.” – CEO of Natixis Global Asset Management in the Americas and Asia.
This investor philosophy is not a good foundation for investing, and it is no wonder the bottom seems to have fallen out, with such an unstable approach to the overall investment marketplace. This mindset has opened the door for investing alternatives to demonstrate their ability to perform well in the long-term, while easing investor apprehensions in the short-term.
A recent survey by Natixis Global Asset Management, found that more than seventy-five percent of institutional investors regard alternative investments, as an “essential” component of a well-diversified portfolio. This change of philosophy has come about over the course of the last five years, and it is no coincidence that it’s time-frame coincides with the fallout of the U.S. Banking scandal. Some investors may say that it is a sign of the times, and the fundamental reason that alternative investments are popular with the global investment community.
The survey went on to reveal that eighty-eight percent of investors were more than pleased with the results of their alternative investments and are confident they are on target to achieve positive results with their allocations. These findings illustrate a fundamental shift in the investment industry in the United States, from the old traditional approach to the new alternative opportunities. In fact, sixty-four percent of the respondents surveyed, stated that they believe the traditional methods and approach to portfolio diversification are in need of immediate replacement. This indicates a strong shift in the common 60/40 ratio strategy, indicating that it no longer is efficient enough to add strength to an investment portfolio and consistently generate positive returns for investors.