Alternative investments: what are their benefits in times of crisis?

The stock and bond market was hit hard in 2022. However, those portfolios that included alternative assets managed to mitigate the falls in fixed and variable income. In fact, in recent years, these have experienced strong growth in an environment of high volatility and uncertainty, according to Andrés Valdivieso, CEO of Participant Capital.

According to the expert, this trend has been accentuated because this type of investment has not been as severely affected by the crisis as other types of assets, due in part to its illiquid and long-term nature that somewhat offset measure the volatilities of traditional markets.

In this sense, this executive indicates that, this year, investors will continue to balance their portfolios seeking a decorrelation of traditional assets (fixed and variable income) in order to diversify to obtain greater profitability in the portfolios, as well as the periodic rents.

These assets are real estate (real estate sector), hedge funds or hedge funds, commodities or raw materials, cryptocurrencies, private equity or venture capital, among others.

In this regard, Valdivieso highlights that the main benefits or advantages of this type of investment are the following:

1. Portfolio diversification: they offer portfolio diversification at a time when most traditional asset classes are seeing their trends increasingly converge over the long term.
2. Decorrelation: This type of asset does not have any type of correlation with traditional assets nor do they follow the behavior of financial markets (although there are exceptions).
3. Variety of instruments: By having access to a broader set of investments and strategies, you have a better chance of earning better returns.