An Introduction to Alternatives
An introduction to and primer on alternative investments

Looking for an alternative to traditional investments?

What Are Alternatives

What's the alternative?

Watch our video primer on alternative investments

Alternatives are investments that don't fall into traditional investment categories—namely long-only stocks, bonds, or cash. Alternative investment managers can invest long or short, across multiple asset classes, aren’t constrained to an investment style, and aren't entirely dependent on the markets going up to achieve positive results.

Traditional vs. alternative investments

Traditional

Alternatives

Traditional_Long
LONG ONLY
Alt_LongShort
LONG + SHORT
Traditional_StockBond
STOCKS + BONDS
All_Asset_Class
ALL ASSET CLASSES
Traditional_Constrain
CONSTRAINED
Alt_Unconstrain
UNCONSTRAINED
Traditional_MarketDir_Sens
MARKET DIRECTION SENSITIVE
Alt_MktDir_Agnost
MARKET DIRECTION AGNOSTIC

There is no guarantee that any investment will achieve its objectives, generate profits or avoid losses.

See the Glossary for term definitions.
PopUp_LongOnly
LONG ONLY

PopUp_LongShort
LONG + SHORT

Long-only vs. long/short

Traditional asset managers are generally “long” securities (they own them with the anticipation that they will go up in price). Alternative managers can be “long” or “short” securities. Shorting, or selling a borrowed security, enables alternative managers to potentially profit from a decline in a security’s price.

PopUp_StockBond
STOCKS + BONDS

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ALL ASSET CLASSES

Stocks+bonds vs. all asset classes

Traditional investments are typically limited to long-only stocks, bonds and cash equivalents. Alternatives, however, may take advantage of opportunities in all asset classes including stocks, bonds, and cash as well commodities and currencies.

PopUp_Constrain
CONSTRAINED

PopUp_UNconstrain
UNCONSTRAINED

Constrained/unconstrained

Traditional investment managers are often limited, or "constrained," by specific sector, region, rating, asset class or capitalization provisions for their strategies. However, alternative investments are typically more unconstrained, meaning alternative managers may be permitted to seek opportunities wherever and in whatever concentration they choose.

PopUp_Sensitive
MARKET DIRECTION SENSITIVE

PopUp_Agnostic
MARKET DIRECTION AGNOSTIC

Market direction sensitive/market direction agnostic

Because they're able to short securities, invest in all asset classes, and are generally less constrained by strict investment mandates, alternative investments performance isn't entirely dependent on the markets going up all the time—alternatives have the potential to be successful in either up or down markets.