PrintCharts | Videos | Calculators
This resource provides educational materials to use during client conversations. Resources highlight topics including the current market environment, alternatives’ role in hedging and portfolio diversification, and how an allocation to alternatives seeks to improve the overall risk/return profile of an investor’s portfolio. All materials are approved for client use.
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Alternative investing – Special Considerations
Investors considering investing in alternatives (“alts”) should be aware of the unique characteristics and risks of these investments.
Alternative mutual funds may hold non-traditional investments and employ more complex trading strategies than traditional mutual
funds.
Alternative funds might invest in assets such as foreign securities, commodities, futures, small-cap companies, high yield bonds (also known as junk bonds),exchange-traded products and other non-traditional type products as compared to traditional stocks,
bonds and cash. Funds that invest in these types of assets may be subject to higher risks, more volatility and less liquidity.
These funds also may employ complex strategies, including hedging and leveraging through derivatives and short selling including but not limited to:
Short-Selling Risk – The potential loss from a short sale is theoretically unlimited since the appreciation of the underlying asset also is theoretically unlimited.
Derivative Risk – Derivatives include instruments and contracts that are based on and valued in relation to one or more underlying securities, financial benchmarks, indices, or other reference obligations or measures of value. Major types of derivatives include futures, options, swaps and forward contracts. Depending on how the Fund uses derivatives and the relationship between the market value of the derivative and the underlying instrument, the use of derivatives could increase or decrease the Fund’s exposure to the
risks of the underlying instrument. Using derivatives can have a leveraging effect and increase fund volatility.
Leveraging Risk – Certain Fund transactions, including entering into futures contracts and taking short positions in financial instruments, may give rise to a form of leverage. Leverage can magnify the effects of changes in the value of the Fund’s investments and make the Fund more volatile.
Investors should fully understand the strategies and be able to bear the risks of any alternative mutual fund they are considering and how it might fit into their overall portfolio before investing. Further information can be found in the Fund’s prospectus.
All investing involves risk including the possible loss of principal.
