Providing Increased Portfolio Diversification for Affluent Investors
Alternative Investments and Your Portfolio
Diversification – it’s the golden rule of investing. And appropriately allocating assets to account for personal objectives, risk tolerance and time horizon is a critical part of a thorough financial plan. For most, a mix of traditional investments – such as stocks and bonds – is a suitable approach. However, more affluent investors should also consider additional strategies to further broaden their portfolios.
While, as with all investments, past performance is not a guarantee of future results, the selective addition of alternative investments that have historically demonstrated lower correlation to traditional market indices may:
* Reduce overall portfolio volatility through diversification and
* Increase long-term portfolio performance through a variety of market conditions.
Examples of some of the investment opportunities in this class include:
* Hedge funds,
* Funds of funds,
* Managed futures,
* Private equity and venture capital, and
* Real estate.
 There is no assurance that these objectives will be achieved.
 Your financial advisor may provide specific information on current offerings.
Diversification and asset allocation do not ensure a profit or protect against a loss.
Case Study: Asset Allocation of University Endowments
According to a 1998 report by the national Association of College and University business officers University endowments in the United States have made alternative investments a significant part of their asset allocations as evidenced by a recent study. While your financial goals, time horizon and financial resources are likely very different from those of endowments or other large institutions, examining their portfolio strategies may provide insight into how alternative investments may fit into your portfolio relative to traditional equity and fixed income holdings.
The endowments’ 40.4% total allocation to alternative investments – specifically hedge funds, private equity, venture capital, real estate and natural resources – is too high for the majority of individual investors. However, the chart demonstrates that institutions use these strategies in a meaningful way to help achieve their long-term objectives.
Your financial advisor, who is familiar with your investment goals, can review your specific situation and determine whether the addition of alternative investments may add similar value to your personal portfolio.
The Raymond James Alternative Investment Group:
Providing Investment Opportunities Designed for Investors with Substantial Assets
The Raymond James Alternative Investments Group is a team of professionals who carefully review and select what they believe are high-quality, nontraditional investments to serve the more extensive financial needs of higher-net-worth clients. By providing thorough due diligence and ongoing monitoring of products within a variety of asset classes, the group assists financial advisors in determining the most appropriate alternative strategies to enhance qualified investors’ asset allocations and add value to their portfolios.
Using a combination of quantitative and qualitative analysis in researching and selecting managers, the Alternative Investments Group evaluates characteristics such as:
* Manager background and experience,
* Manager tenure in the specific investment style,
* Manager historical performance and volatility,
* Historical correlation of manager performance to traditional benchmarks,
* Performance during difficult markets,
* Risk management policies and techniques, and
* Manager policies toward use of leverage and other speculative strategies.
A Team Approach to Meeting Your Investment Needs
Your relationship with your Raymond James financial advisor presents a rare opportunity to work with someone who provides personalized attention and truly understands your goals, while offering the resources and support of a multinational financial services firm, including the expertise offered by the Alternative Investments Group. By partnering with your financial advisor, the group can create customized solutions to suit the specialized needs that are related to managing substantial assets, helping you reach your overall financial goals.
Since alternative investments may not be suitable for all investors, it is critical that you and your financial advisor work together to determine what investments may be right for you. Factors you should discuss with your financial advisor when evaluating alternative investments for your portfolio include:
* Your current asset allocation and the size of your portfolio,
* Your time horizon and risk tolerance,
* Liquidity needs in your portfolio,
* Willingness to accept risk associated with more speculative strategies, and
* Tax considerations.
This page is intended for informational purposes only, does not constitute investment advice, or a recommendation, or an offer or solicitation, and is not the basis for any contract to purchase or sell any security, or investment product. While information herein has been obtained from sources considered to be reliable, Raymond James does not guarantee its accuracy or completeness. Please review any offering materials or the prospectus carefully, and consult with your tax advisor or accountant prior to investing. Alternative Investments involve specific risks that may be greater than those associated with traditional investments and may be offered only to clients who meet specific suitability requirements, including minimum net worth tests. You should consider the special risks with alternative investments including limited liquidity, tax considerations, incentive fee structures, potentially speculative investment strategies, and different regulatory and reporting requirements. You should only invest in hedge funds, managed futures or other similar strategies if you do not require a liquid investment and can bear the risk of substantial losses. There can be no assurance that any investment will meet its performance objectives or that substantial losses will be avoided.