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How To Look at Alternatives in the Middle of Market Volatility?

Government lockdowns resulting from the COVID-19 pandemic threw the global financial markets off stride in March. As it turned out, alternative investments lived up to their promise of risk mitigation relative to traditional portfolios composed mainly of stocks and bonds.

You’ve no doubt read all the headlines by now, including:

“Fastest bear market in history.”

“Worst global recession since the Great Depression.”

“Unprecedented monetary policy in response to severe economic downturn.”

The COVID-19 pandemic was one of the most volatile investment periods in history. The CBOE Volatility Index, commonly known as the VIX, peaked in the mid-80s in March exceeding the peaks of the 2008-09 financial meltdown.

Alternative investments – an umbrella term describing assets that fall outside of conventional investment categories like stocks, bonds and cash – have been growing in popularity since the global financial crisis. Appetite for alternatives, which includes hedge funds, venture capital, real estate, precious metals, private mortgages and tangible assets, has continued to grow amid the pandemic.

Alternatives are now a $10 trillion market, and are expected to reach $14 trillion in 2023, according to Preqin research.

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