Protect and Grow Your Wealth with Alternatives

Diversification across asset classes, including alternatives, can potentially help you weather market volatility, inflation, and other unforeseen circumstances.

1

The Changing Investing Landscape

  • Investors often rely on a negative correlation between stocks and bonds, meaning that when stock prices decline, bond prices rise (and yields go down). As a result, the 60/40 portfolio has been a classic way to balance an investment portfolio
  • With higher-than-expected inflation, rising interest rates, and clear signals of a slowing economy, the traditional 60/40 portfolio is under increasing pressure to perform in line with historical expectations

It’s Rare When Stocks Go Down and Bonds Don’t Go Up
1929 - 2022

Source

Bloomberg and BlackRock, as of May 31, 2022.The annual bond returns are represented by the Bloomberg U.S. Aggregate Bond Index from 1976 to 2022. Prior to 1976, the annual bond returns are based on the 10-year U.S. Treasury Bond. The annual stock returns are represented by the S&P 500 Index from 1957 to 2022. Prior to 1957, the annual stock returns are based on the price changes in the S&P Composite Index. Index performance is for illustrative purposes only. You cannot invest into an index. Past performance is not a reliable indicator of future results.

2

Rethinking the 60/40 Portfolio

  • The traditional guide for the moderate risk investor to balance the risk/reward of investing is becoming unbalanced
  • Over the last 30 years, a 60/40 portfolio has generated a 7% return. According to JP Morgan, a 60/40 portfolio is expected to yield a 4% return over the next 10- 15 years
  • We believe the typical investor will experience little reward during volatile market conditions
  • Is there another way to diversify risk and rebuild your portfolio?

Historical and Expected Annualized Returns

Source

Bloomberg and J.P. Morgan Asset Management. Historical annualized returns for bonds are represented by the MSCI All Country World Index. Historical annualized returns for stocks are represented by the Bloomberg U.S. Aggregate Bond Index. You cannot invest into an index. Expected Annualized Returns based the asset classes are for illustrative purposes only and should not be relied upon for any recommendations. See additional disclosures below. Past performance is not a reliable indicator of future results.

3

Diversifying your risk with alternative investments

  • Alternative investments are financial assets that fall outside of the traditional public equity and bond markets
  • With a lower correlation to stocks and bonds, alternatives can help to balance volatility within a portfolio
  • Because they’re unconventional investments, alternatives are not appropriate for all investors
  • Real estate, commodities, private equity, and hedge funds are a few common examples of alternative investments

Real Estate

Investment properties like residential apartments, mobile home communities, or office buildings

Commodities

Natural resources such as oil, natural gas, and precious metals, and also things like coffee, corn, and grains

Private Equity

Investments in private companies, rather than publicly traded stocks. Types of private equity investments include distressed funding, leveraged buyouts, and fund of funds

Hedge Funds

Investment funds engage in buying and selling a variety of securities including stocks, bonds, and derivatives

4

Balancing the Risk and Return

  • Investment opportunities that expand beyond public equity and bond markets look to improve the risk and return profile of a portfolio
  • Due to the lower correlation to broad market trends, alternatives seek to help balance volatility, creating an alternative source of return

Expected Returns for Traditional and Alternative Investments

Source

J.P. Morgan Asset Management; as of September 30, 2021. Expected returns are estimates and for illustrative purposes only. References to future returns are not promises or even estimates of actual returns of any client portfolio. This information is not intended as a recommendation to invest in any particular asset class or strategy. It should not be relied upon as a recommendation to buy or sell any securities. While the information presented is believed to be reliable, no representation or warranty is made concerning the accuracy of any data in this presentation, and we do not undertake any responsibility to update such information or advise you of any change in such information in the future.

Important Disclosures

The material shown on this page is for discussion purposes only. Nothing shown in this material is intended to provide, and it should not be relied upon for, accounting, legal, tax or investment advice or recommendations. The presented material is general in nature. We are not making any specific recommendations regarding any security or investment strategy, and you should not make any investing decisions based on the information presented in this material. While the information presented is believed to be reliable, no representation or warranty is made concerning the accuracy of any data in this presentation, and we do not undertake any responsibility to update such information or advise you of any change in such information in the future.

All investments involve risk of loss, and nothing in this document is intended to imply that any investment managed by us is risk-free. All investment activity bears risk of loss, including complete loss. Alternative investments may engage in speculative investment practices which increase investment risk and can be highly illiquid.

The returns to any investor will vary from the returns reflected in this presentation based on a variety of factors, including the timing of contributions and withdrawals, trading and brokerage costs, custodial fees and the amount of applicable fees to such client or investor. Past performance is not a reliable indicator of future results.