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Diversifying Your Portfolio With Liquid Alternatives

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Exploring a Broader Opportunity Set

Mutual funds and ETFs have evolved to offer alternative investment opportunities to nearly every investor.

Alternatives Use Familiar Investments and Apply Differentiated Strategies


Alternative strategies generally use traditional investments, like stocks and bonds, and apply non-traditional investment approaches in an effort to provide differentiated returns. Alternative strategies can also access other asset classes, such as real estate or commodities.


Alternatives Are Now More Accessible


For many years, alternative investments were only available to institutions, like pensions and endowments, and certain individual investors. Today, nearly every investor can access the differentiated return characteristics of alternatives through mutual funds or ETFs, also known as liquid alternatives.

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Source: GSAM. For illustrative purposes only. Views and opinions expressed are for informational purposes only and do not constitute a recommendation by GSAM to buy, sell, or hold any security. An investment in alternatives is not appropriate for all investors. Please see additional disclosures. Note that alternative investing is not suitable for all investors and liquid alternatives are not riskless investments, so investors can lose money.

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Alternatives: Exploring a Broader Opportunity Set

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Broader Adoption of Alternatives Is Underway


Liquid alternatives industry assets and the number of available funds have grown tremendously as these strategies have become increasingly available in mutual fund format.

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Source: Morningstar as of September 30, 2016. For illustrative purposes only. In an effort to distinguish funds by what they own, as well as by their prospectus objectives and styles, Morningstar developed the Morningstar Categories. While the prospectus objective identifies a fund's investment goals based on the wording in the fund prospectus, the Morningstar Category identifies funds based on their actual investment styles as measured by their underlying portfolio holdings (portfolio and other statistics over the past three years).

Taking an Alternate Path to Generate Returns

Alternatives may help investors achieve a smoother investment experience over various market cycles, allowing for long-term outperformance.

Alternatives Have Often Outperformed Either Stocks or Bonds


A more flexible investment approach allows alternative strategies to access distinct drivers of return. As a result, they may behave more independently than traditional asset classes. Alternatives have historically provided differentiated returns and helped to stabilize investment portfolios over time.

Over the Past 26 Years, Alternatives Outperformed at Least One Element of an Investor’s Core Portfolio 69% of the Time.

Additional Returns

For Illustrative Purposes Only. Source: Bloomberg, GSAM. Underlying Indices: Core Equity – S&P 500 Index; Core Fixed Income – Barclays US Agg Bond Index; Alternatives – HFRIFOF Index. Please see additional disclosures. Time period shown is earliest common inception date (HFRI FoF inception 1/1/1990) through the most recent end of year. Past performance does not guarantee future results, which may vary.

Alternatives Have Provided Additional Stability to Investors


Over the past 25 years, stocks have appreciated in value by a factor of ten, though the ascent has been rocky at times. Bonds have had more modest but stable appreciation. By diversifying sources of return and helping to provide stability in market downturns, alternatives may encourage investors to stay the course over various market cycles.

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Solving a Return Conundrum

After years of strong returns for stocks and bonds, the future may not resemble the past.

We Believe Now Is the Time to Diversify Your Portfolio with Alternatives


With stock prices and bond yields near record levels, we believe it is unlikely for current trends to continue. Alternatives have historically delivered attractive returns relative to stocks and bonds during challenging market environments.

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Conversation Starters


Insights and analysis designed to address questions and provide information to investors exploring alternative investments.

Learn More About Liquid Alternatives


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