Alternative Investments Are Consistently Proving Their Worth

For any investor, the "bottom-line" is all that matters, at the end of the day. In the United States, giant pensions funds, private and state-owned, are always in the market to get the best return for their investments. The last ten years in the U.S., most financial firms and pension funds have had a difficult time consistently growing their portfolio while navigating the tumultuous waters of the stock market, banking and housing markets. This is in part related to the fact that many pension funds were established with traditional investment strategies, with little or no alternative options in their portfolios.

Nowadays we are seeing private investors and big pension funds, making the move away from traditional options like stocks and into alternatives like hard assets. A recent study noted that in the past ten years, the Missouri State Employees Retirement System was the highest-yielding retirement fund with an average return of 8.1%, compared to the average return of just 6.4% among 97 state pension plans surveyed. It just so happens that 65% of the retirement fund in Missouri was made up of alternative options, a far greater percentage than the rest of the funds surveyed. This is certainly going to get the other pension funds to take notice of the strategy and look to making some fundamental changes to their approach to making their investments in the future.

Because investing in alternative investments has proven to be profitable option, as well as a means of diversifying a portfolio, more and more private and institutional investors are favoring non-traditional assets, especially when the markets are uncertain. In the 1990’s, alternative investments made up less than 5% of an investor’s portfolio. Today, industry experts recommend including at least 20-30% alternatives, to guard against poor-performing stocks and bonds. Some have even gone as far as suggesting that number should be 50%. The bottom-line in investing is profits, regardless whether they are generated from traditional or alternative means. It just so happens that lately, alternatives have been out-performing the traditional options with consistent returns and a track record of long-term investment success. Understandably, this appealing to both pension fund managers maintaining their portfolio in tumultuous markets and private investors saving for retirement.