Don’t Know Much About … Alternatives

Liquid alternatives are a growing investment category, but many investors find them complex. AllianceBernstein’s interactive website is designed to explain the array of liquid alternative strategies available, illustrate how they might fit into diversified portfolios, and explain how they may be used to either mitigate risk or enhance returns.

A 12-question challenge called “Bring your ‘A’ Game” assesses the user’s knowledge of liquid alternative investments and is designed to guide advisers in helping clients better understand the category.

Topics range from the Sharpe ratio (which measures an investment’s return per unit of risk) and how it is calculated to yield-curve “flatteners.” Not a superhero move, the quiz tells you, but a trading strategy aimed to profit when a yield curve flattens.

Each question has a tip box that can be moused over to bring up an explanatory chart or graphic. Answers are detailed and technical, but useful to the investor looking to learn about the subject. As an example of a “flattener” trade: “As yields rise, prices fall; as yields fall, prices rise,” the answer helpfully tells the quiz-taker. “If short-term yields rise while long-term yields fall, a short position in two-year yields and a long position in 10-year yields is likely to profit, if the curve flattens.”

Many investors prefer information that is digital as well as interactive, noted Robert Keith, head of AllianceBernstein’s client group, making it essential for advisers to have dynamic resources available that let them easily walk clients through the benefits of liquid alternative investments. 

“Many investors have rightly recognized that they may need to look beyond the traditional 60/40 investment portfolio and incorporate alternative strategies that focus on balancing risk and return in today’s more volatile market,” Keith said.

Advisers can view the site and test their alternative investment IQ at: www.alliancebernstein.com/go/alternatives.