Altegris Alternatives Allocator
Our Alternatives Allocator tool provides a further illustration of how adding alternatives to a traditional portfolio historically would have affected risk and return performance.

The potential for positive returns in virtually any market environment

Growth of an initial $1,000 investment in alternative investments vs. US Stocks

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. The total return of an investment is only one measure of performance. Performance should never be the sole consideration when making an investment decision. There is no guarantee that any investment product will achieve its objectives, generate profits or avoid losses. The referenced indices are shown for general market comparisons and are not meant to represent any particular Fund. An investor cannot directly invest in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented. US Stocks represented by S&P 500 Total Return Index; Alternatives represented by 1/3 Barclay Global Macro Index, 1/3 Altegris 40 Index® (started July 2000; data available back to 1990), 1/3 HFRI Equity Hedge (Total) Index. Bull markets: 01/97-08/00, 10/02-09/07, 03/09-present; tech wreck: 09/00-09/02; credit crisis: 10/07-02/09. Source: Altegris.

Alternatives: your possible low-correlation diversifier

Investors victimized by past volatility may question the ability of their portfolio to withstand market swings. If so, investors should consider adding alternatives to their traditional investments as a way to potentially reduce their portfolios’ sensitivity to such swings. Alternatives typically have a different return profile than traditional investments.

Historical Correlation to US Stocks

Understanding correlation:

Correlation measures how closely in tandem the values of securities move together over time. A correlation of 1 indicates the two returns move perfectly together, 0 (zero) indicates the movements are random, or not at all correlated, and -1 indicates equal movement in opposite directions.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. An investor cannot invest directly in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented. Correlations by definition will vary over time, and while this data is true for historical performance over this time period, there is no guarantee that these correlations will persist. Indices: Managed Futures - Altegris 40 Index (started July 2000; data available back to 1990); US Stocks - S&P 500 TR Index; Global Macro - Barclay Global Macro Index; Long/Short Equity - HFRI Equity Hedge (Total) Index; Commodities - S&P GSCI Commodities Index; Int’l Stocks - Morgan Stanley Capital International, Inc. EAFE Net Index; US Bonds - US Aggregate Bond Index; REITs - FTSE NAREIT Composite Total Return Index; Market Neutral - HFRI EH: Equity Market Neutral Index; Short Bias - HFRI EH: Short Bias Index; Emerging Markets - HFRI Emerging Markets (Total) Index; Event-driven - HFRI Event-Driven (Total) Index; Relative Value - HFRI Relative Value (Total) Index; Multi-Strategy - HFRI Fund Weighted Composite Index. Source: Altegris.

Opportunistic market exposure

Many investors believe in the virtues of portfolio diversification. Yet those who thought they had achieved sufficient diversification through a portfolio of stocks and bonds or with the inclusion of other assets traditionally viewed as diversifiers (such as real estate and commodities), got a rude awakening. When U.S. stocks lost almost half their value twice between 2000 and 2010—during the “Tech Wreck” and the “Credit Crisis,” many traditionally invested portfolios suffered.

A bumpy ride: Growth of $1,000

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. The total return of an investment is only one measure of performance. Performance should never be the sole consideration when making an investment decision. The above is not intended, and should not be construed as, asset allocation advice. There is no guarantee that any investment will achieve its objectives, generate profits or avoid losses. An investor cannot invest directly in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented. Indices: US Stocks: S&P 500 TR Index; US Bonds: US Aggregate Bond Index; Commodities: S&P GSCI Total Return Index; Int'l Stocks: Morgan Stanley Capital International, Inc. EAFE Net Index; REITs: FTSE NAREIT Composite Total Return Index. Traditional Portfolio = 60% US Stocks and 40% US Bonds; Traditional + Other Assets = 42% US Stocks, 28% US Bonds, 10% Commodities, 10% Int'l Stocks, 10% REITs. Bull markets: 01/97-08/00, 10/02-09/07, 03/09-present; tech wreck: 09/00-09/02; credit crisis: 10/07-02/09. Source: Altegris.

Adding alternatives to the mix

At Altegris, we believe a portfolio that goes beyond traditional stocks and bonds and includes alternative investments may potentially add to overall portfolio efficiency.

The chart below illustrates through indices, what would have happened if alternatives were added to a traditional portfolio of stocks and bonds from the chart above (a traditional portfolio plus 30% allocation to a basket of alternatives, which includes an equal distribution to managed futures, global macro and long/short equity).

Historical portfolio comparisons

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. The total return of an investment is only one measure of performance. Performance should never be the sole consideration when making an investment decision. The above is not intended, and should not be construed as asset allocation advice. There is no guarantee that any investment will achieve its objectives, generate profits or avoid losses. An investor cannot invest directly in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented. Indices: US Stocks: S&P 500 TR Index; US Bonds: US Aggregate Bond Index; Commodities: S&P GSCI Total Return Index; Int'l Stocks: Morgan Stanley Capital International, Inc. EAFE Net Index; REITs: FTSE NAREIT Composite Total Return Index; Managed Futures: Altegris 40 Index® (started July 2000; data available back to 1990); Global Macro: Barclay Global Macro Index; Long/Short Equity: HRFI Equity Hedge (Total) Index. Traditional Portfolio = 60% US Stocks and 40% US Bonds; Traditional + Other Assets = 42% US Stocks, 28% US Bonds, 10% Commodities, 10% Int'l Stocks, 10% REITs; Traditional + Alternatives = 42% US Stocks, 28% US Bonds, 10% Managed Futures, 10% Global Macro, 10% Long/Short Equity. Bull markets: 01/97-08/00, 10/02-09/07, 03/09-present; tech wreck: 09/00-09/02; credit crisis: 10/07-02/09. Source: Altegris.

Risk-adjusted returns

An investment's risk-adjusted return is a measure of how much risk an investor incurs to earn a return. A look at the performance of alternatives vs. U.S. stocks over various time periods demonstrates that alternatives generated generally higher returns with lower risk, as measured by standard deviation and worst drawdown.

Historical annualized returns

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. There is no guarantee that any investment will achieve its objectives, generate profits or avoid losses. An investor cannot invest directly in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented. Indices: US Stocks: S&P 500 TR Index; Managed Futures: Altegris 40 Index® (started July 2000; data available back to 1990); Global Macro: Barclay Global Macro Index; Long/Short Equity: HRFI Equity Hedge (Total) Index. Source: Altegris.

Historically lower volatility and drawdowns

Alternatives' worst drawdowns (the percentage value decline from a peak to a trough during a period of time) and standard deviations (a measure of volatility) were all lower than stocks during this time period. In the "scattergram" below, a position close to the top left corner indicates historically less volatility and a lower worst drawdown.

Historical worst drawdown and standard deviation

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.There is no guarantee that any investment will achieve its objectives, generate profits or avoid losses. An investor cannot invest directly in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented. Indices: US Stocks: S&P 500 TR Index; Managed Futures: Altegris 40 Index® (started July 2000; data available back to 1990); Global Macro: Barclay Global Macro Index; Long/Short Equity: HRFI Equity Hedge (Total) Index. Source: Altegris.

Gain a deeper understanding of alternative investments

As part of the Altegris Academy, Altegris brings you a variety of resource materials that will help you better understand the potential advantages of alternative investments.

WhatsAlternative

What’s the Alternative?

08/11

An animated introduction to alternatives and a look at how can they potentially help diversify a traditional investment portfolio.