ALTERNATIVE INVESTMENTS

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Investment strategies

Definition

Alternative asset management represents a heterogeneous universe of investment strategies and management styles that aim to generate a return independent of market trends. An asset class in its own right, alternative asset management is the ideal complement to traditional portfolio allocation (equities, bonds) and an important pillar of diversification.

Alternative asset management uses sophisticated management techniques to exploit all financial instruments that provide the option of switching or combining sell and buy positions in the various markets (bond market, equity market, money markets, etc.).

Main characteristics

• The aim of an absolute return that is not based on an index reference and takes advantage of both the ups and downs of the market
• The aim of a return that is not correlated to traditional markets or only to a limited extent
• The aim of a stable return characterised by low volatility

Alternative asset management is notably accessible via :
• alternative funds based on single or multi-strategies, hedge funds ,
• or funds of funds (alternative multi-management) that combine different managers and/or different management styles in order to better manage risk.

Alternative management strategies

In order to achieve their performance objectives, alternative management funds employ a variety of non-traditional techniques and strategies such as derivative instruments, leverage strategies, arbitrage strategies, etc. that combine long and short position taking:

• Arbitrage: this enables investors to take advantage of any inconsistencies that may prevail at a given moment regarding the price of a single stock (in different markets, for example)
• Long/short strategy: « Going long » means buying an asset thought to be undervalued in the hope that its price will increase, whereas « going short » means taking out an option to sell an asset thought to be overvalued in the hope that it can be bought for a lower price at the time of sale.
• Global directional strategies: also known as global macro strategies or CTAs (commodities trading advisors), directional strategies are designed to profit from major trends that emerge in the financial markets.