Alternative Investments: Building Better Portfolios One Asset Class at a Time

For much of history, limousines were accessible only to the wealthy, the powerful, or those who had the occasion to splurge. Most people found limousines unaffordable and impractical, and opted to use their own car or traditional public transportation. After all, they still were able to get to the same place in the end. Along came Uber in 2009 and made limousine-type service accessible, practical, and often beneficial for the mainstream. Similarly, investing in alternative asset classes (e.g. real estate, commodities, and private placements) has been common practice among large institutions and the ultra-wealthy for decades. However, in the last ten years alternative investments have become increasingly available in investment vehicles that are more suitable for mainstream investors (e.g. mutual funds and exchange-traded funds). The result of this industry shift is that mainstream investors are now able to further diversify their investment portfolios with asset classes that act differently than stocks and bonds. It should be noted that alternatives are complex, and it is paramount that sound due diligence be conducted prior to implementing any alternative investment strategy.

Savant’s due diligence process has narrowed the focus to alternative asset classes that exhibit qualities we highly value: cost-effective implementation, robust asset class data, and transparency, among others. We believe that combining a modest allocation to several alternative strategies with a traditional portfolio of stocks and bonds has the potential to reduce portfolio risk and enhance long-term returns. This paper is designed to provide background, perspective, and a thoughtful outlook on the topic of alternative investing.

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