What Are Liquid Alternative Investments?

Vern Sumnicht CEO \ CIO |

Liquid alternative investments refer to investment strategies that aim to provide investors with access to alternative investment opportunities that have traditionally been reserved for institutional investors, high-net-worth individuals, and family offices. These strategies are designed to generate returns that are not highly correlated with traditional asset classes such as stocks, bonds, and cash.

Liquid alternative investments are typically offered in the form of mutual funds or exchange-traded funds (ETFs) that invest in a wide range of alternative asset classes, including private equity, hedge funds, real estate, commodities, and currencies. These investments are considered liquid because they can be bought and sold on public exchanges, just like traditional investments, and they do not require the lengthy lock-up periods typically associated with traditional alternative investments.

Investing in liquid alternative investments can provide several benefits to investors. First, they can offer diversification benefits by providing exposure to asset classes that may not be available through traditional investments. Second, they can potentially generate higher returns than traditional investments by taking advantage of market inefficiencies and alternative investment strategies. Finally, they can provide a way to hedge against inflation and other macroeconomic risks that can negatively impact traditional investments.

However, it is important to note that liquid alternative investments are not suitable for all investors. They can be complex, and their performance can be highly dependent on the skill of the investment manager. Additionally, they may be subject to higher fees and expenses compared to traditional investments. Investors should carefully consider their investment goals, risk tolerance, and investment time horizon before investing in liquid alternative investments.

To make it even easier for advisors to invest their clients into liquid alternative investments, consider the iSectors® Liquid Alternatives Allocation. iSectors® has managed this allocation since 2009. It contains variations of the ETFs and mutual funds mentioned above, including but not limited to real estate, market neutral, multi-strategy alternatives, long/short equity, precious metals bullion, global resources, micro-cap stocks, and many more. For full details on the iSectors® Liquid Alternatives Allocation, please visit the iSectors® website or give us a call.