The premise of positive returns in any market is an alluring proposition for risk adverse investors. These types of alternative strategies were once the realm of sophisticated hedge funds and institutional portfolios. However, they are now starting to make their way into the accounts of mainstream investors via exchange-traded funds (ETFs).
Alternative strategies are generally given more flexibility than a traditional passive index tracking a basket of stocks or bonds. They may have the capability to own futures contracts, short positions, currency pairs, or even volatility-linked products. Put simply, these “go anywhere, do anything” investment styles have the freedom to select virtually asset classes they feel are most appropriate for the current market environment.