Diversifying with Alternative Investments

Alternatives can help diversify and complement traditional portfolios by seeking returns that are independent from equity and bond markets and reducing overall sensitivity to traditional markets. 

It is difficult to predict when investments will perform well or poorly over the next decade or even the next year. As shown in the chart below, Stocks, Bonds, and Alternatives have each experienced performance highs and lows over time. However, the Diversified Portfolio, which incorporates and spreads risk across all three asset classes, has experienced more consistent long-term performance. As a diversifying asset class, alternatives can be viewed as a valuable component of a long-term investment plan.

Why Invest in Alternatives?

In this video introduction, we outline the potential benefits of investing in alternatives and explain how they may enhance a traditional portfolio.

Risk Disclosures:
Alternative investing strategies such as Equity Market Neutral and Managed Futures involve the use of derivatives, forward and futures contracts, and commodities, which can lead to additional risks including increased volatility, lack of liquidity, and possible losses greater than the initial investment as well as increased transaction costs. All investors considering these strategies should be able to tolerate wide price fluctuations.  Arbitrage strategies have the risk that the anticipated opportunities do not play out as planned, resulting in potentially reduced returns or losses. Before trading, investors should carefully consider their financial position and risk tolerance to determine if the proposed trading style is appropriate. All investing is subject to risk including the loss of principal. All funds committed to such a trading strategy should be purely risk capital. Past performance is no guarantee of future results. Diversification does not eliminate risk.

An alternative allocation can be an effective strategy against uncertainty and the inevitable underperformance of an individual asset class.

Calendar Year Performance
January 1, 1990 - December 31, 2021

Source: AQR, Bloomberg, Barclays, HFRI. 
Stocks are represented by the MSCI World Index, Bonds by the Bloomberg Barclays U.S. Aggregate Index, and Alternatives by the HFRI Fund Weighted Composite Index. The Diversified Portfolio is 40% Stocks, 40% Bonds, 20% Alternatives. 
The portfolio shown is intended for informational purposes and does not represent actual results of any product or strategy. 
Data is presented gross of any fees, with the exception of data based on the HFRI Fund Weighted Composite Index (detailed on the back), which is a net of fee index. Had fees for the other indices been included performance would have been lower. Time period chosen based on the 01/01/1990 inception of the HFRI Fund Weighted Composite Index. Portfolios shown in this document are rebalanced monthly. Past performance is not a guarantee of future performance. Diversification does not eliminate the risk of experiencing investment losses. One cannot invest directly in an index. 



Benefits to Investors Include:

Portfolio Diversification
When added to a traditional portfolio allocation, alternatives may provide additional diversification benefits such as reduced portfolio volatility or improved risk-adjusted returns.
Opportunity for Additional Sources of Return
Alternatives can provide investors with an additional opportunity for positive returns that are not accessible through traditional investments.
Potential to Mitigate Losses
Alternatives tend to perform well in various market environments due to their reduced sensitivity to traditional stock and bond market movements.

AQR: A Leader in Alternatives

As a leader in alternatives, AQR has more than 20 years of experience managing the complexities of these strategies, including ten years of managing alternative mutual funds. We encourage you to explore our research on alternative investing on aqr.com

There can be no assurance that any investment strategy will be successful.


© AQR Funds are distributed by ALPS Distributors, Inc. AQR Capital Management, LLC is the Investment Manager of the Funds and a federally registered investment adviser. ALPS Distributors is not affiliated with AQR Capital Management. 

Investors should carefully consider the investment objectives, risks, charges and expenses of the Funds before investing. To obtain a prospectus containing this and other important information, please call 1-866-290-2688 or click here to view or download a prospectus online. Read the prospectus carefully before you invest. 

The information provided herein (including any separate documents that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information about our products and services and to otherwise provide general investment education. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of AQR Capital Management, LLC (“AQR Capital”) nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement investor, contact your financial advisor or other fiduciary unrelated to AQR about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances.

Diversification does not eliminate the risk of experiencing investment loss. There are risks involved with investing including the possible loss of principal.

View definitions of benchmarks and other terms used hereOne cannot invest directly in an index.

There are risks involved with investing including the possible loss of principal.
Past performance does not guarantee future results.
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