Why Consider Low-Correlating Solutions?
Put Low-Correlating Solutions to Use
How do low-correlating solutions help?
They have the potential to:
- Generate returns differently than traditional stocks and bonds
- Help provide greater diversification
- Provide exposure to strategies whose expected returns do not correlate with traditional investments
- Mitigate downside risk
- Improve long-term return potential
A Study of Different Low-Correlating Solutions
There are many types of low-correlating strategy solutions, including:
- Managed Futures
- Long/Short Commodities
- Long/Short Equities
- Income Solutions
- Trend Following
Why are Low-Correlating Solutions Gaining Favor with Universities and Endowments?
Some of the brightest investment minds are employed by large college and university endowments. These institutions historically allocated the vast majority of their portfolios to traditional investments.
As they have sought to reduce risk, grow and preserve capital, and meet their investment objectives, the investment focus of larger endowments ($1 billion and above) has shifted to a greater allocation of low-correlating assets. The pie charts below illustrate how these endowments have changed the way they invest, embracing low-correlating investments while reducing exposure to traditional stocks and bonds.
The good news is, many of those low-correlating investment solutions are now available to all investors.
Source: 2019 NACUBO-Commonfund Study of Endowments, www.nacubo.org. Data is based on endowments with greater than $1B in investment assets.
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