In today’s environment, markets and uncertainty go hand-in-hand. Between potential interest rate hikes, rising inflation and the potential impact of the new Omicron variant, many investors are seeking out investment opportunities outside the equity market. Bloomberg recently turned to AlphaCore Wealth Advisory Senior Wealth Advisor Stephanie Williams, CAIA, for insight on where she believes investors should deploy $1 million right now.
With alternative investments’ ability to provide a differentiated return stream away from stocks and bonds, Williams believes that now is an opportune time for investors to allocate assets to hedge funds that utilize both long and short strategies.
“The past decade has been a tough environment for long/short strategies versus long-only strategies, because the market has moved steadily in one direction with little volatility,” Williams explains. “Stocks have often moved synchronously up and down regardless of company fundamentals, akin to a rising tide lifting all boats. This is common when going from a low valuation environment to a high valuation environment. We are starting to see signs of this changing, creating more opportunities for skilled investment managers to take advantage of a wider distribution of stock prices.”
Williams specifically believes that long/short equity hedge funds that are investing in tomorrow’s FAANG and fintech stocks and shorting traditional businesses that utilize outdated business models should be of particular interest to investors.
“What is unique about this strategy is that they maintain a robust short portfolio alongside their longs, which results in average net exposure of only 56% to the broad equity market,” Williams tells the publication in reference to one of these funds. “This means they may offer protection in the event of a market downturn and can potentially compound at a higher rate over a market cycle.”