Arnerich Massena is pleased to announce the publication of a new white paper: Seeking Asymmetry: What the Hedge & Diversifying asset class brings to a portfolio. The white paper examines the benefits of the Hedge & Diversifying asset class, how it fits into a portfolio, and why investors should consider incorporating it into a long-term asset allocation strategy.

Investor sentiment around hedge funds varies based on the market environment; it can be challenging to recognize the value of hedge funds during strong bull equity markets. But we believe the Hedge & Diversifying asset class adds stability and downside protection, and can be a valuable addition for some investors when used appropriately. In this paper, we share our data and reasoning for utilizing this asset class, as well as outlining how we make use of Hedge & Diversifying investments in our portfolio construction.

“Hedge fund managers look for opportunities for asymmetric return,” explains Co-CEO and Chief Investment Officer Bryan Shipley, CFA, CAIA. “Which means they are seeking avenues for higher potential return with limited volatility. Capital preservation is a key outcome, and they typically actively manage for contingencies on the downside.”

“Data show that hedge funds have historically provided a generally smoother ride over equities for investors,” points out Senior Research Analyst Arthur Coyne, CFA. “Over long time periods, we see that hedge funds lie in a sweet spot between bonds and stocks. They earn a higher return than bonds with only slightly higher volatility, and they tend to have much less volatility than stocks but with only a slightly lower long-term return.”

The paper suggests that the stability and risk mitigation Hedge & Diversifying investments can add to an investment strategy could be valuable to some investors and offers some foundational information about its objectives and strategies to help investors become more familiar with the asset class. Closing with information about the firm’s approach to investing in this space, the paper provides investors with the information they need to make educated decisions regarding their asset allocation strategy.

Click here to read and/or download the white paper.