Mark Melin, Opalesque Futures Intelligence, Chicago:
In this interview, Opalesque Futures Intelligence Editor Mark Melin discusses current trends in alternative investing with Rob Guttschow and John Gambla of First Trust Advisors
Mark Melin: Can you just describe the benefits of adding alternative investments to a traditional portfolio?
Rob: Thank you very much Mark. The benefits of investing in alternatives are their ability to potentially enhance the risk-return characteristics of a traditional investment portfolio. First Trust is getting into the alternatives market to offer financial advisors and their clients the tools they need, via the ETF market, to build well diversified high return per unit of risk portfolios. John and I currently manage two ETFs focusing on alternatives and eventually hope to build an entire suite of alternatives to fit a variety of investor needs.
Traditional investments focus on building diversified portfolios of long only stocks, long only bonds and cash. Alternative investments, on the other hand, seek out non-traditional alphas and non-traditional betas seeking to capture returns from these non-traditional sources. Because alternatives are seeking returns in different places and in different ways than traditional portfolios, they often times have low or even negative correlations with stock and bond markets.
Modern portfolio theory says more diversification is generally a good thing. Alternative inve......................