Fund ExplorerIndicesInsightsVideosPricing

Are Alternative ETFs Good Diversifiers?

Uncorrelated returns are not a panacea

Nicolas Rabener
10 min read
6 Dec 2022

SUMMARY

  • Alternative products with uncorrelated returns do not necessarily provide diversification benefits
  • Out of 10 alternative ETFs, only one product improved the Sharpe ratio of a 60/40 portfolio
  • Correlations should be regarded carefully in fund selection

INTRODUCTION

Given the demise of the traditional 60/40 portfolio comprised of equities and bonds in 2022, investors are desperate for diversifying strategies. There are thousands of unique strategies like private equity, hedge funds, tactical asset allocation, and so on that claim to offer uncorrelated returns and compete for capital.

Keep reading with Institutional

Includes the full research library of 400+ articles, plus Returns Analyzer and Risk Analytics for return and risk contribution analysis.