Alternatives span the risk/reward spectrum

Risk/Reward: Alternatives and Traditional Strategies

There are many types of alternative investments. As the chart shows, while they span the risk/reward spectrum, historically, they’ve offered better risk-adjusted returns than traditional asset classes. Often, they’ve significantly outperformed while experiencing lower volatility. Roll over chart points for data, and click on alternative investment points for more information.

PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. The referenced indices shown are for general market comparisons and are not meant to represent any particular Fund. 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. Standard deviation is a statistical measure of how consistent returns are over time; a lower standard deviation indicates historically less volatility. INDICES: US Bonds: US Aggregate Bond Index; US Stocks: S&P 500 Total Return Index; Intl 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); Commodities: S&P GSCI Total Return Index; Global Macro: Barclay Global Macro Index; Long/Short Equity: HFRI Equity Hedge (Total) Index; Emerging Markets: HFRI Emerging Markets (Total) Index; Event-Driven: HFRI Event-Driven (Total) Index; Multi-Strategy: HFRI Fund Weighted Composite Index. SOURCE: Altegris

There are many different strategies that may be considered "alternative investments". At Altegris the criteria we use to describe alternatives include liquid and flexible investment opportunities that can go short with the potential to profit when markets are down. Here are six examples we believe have the potential to perform no matter which way traditional markets move.


Managed futures

  • Multiple markets and asset classes
  • May take both long and short positions in futures contracts
  • Multiple trading disciplines, primarily trend following managers that react to price movement

Global macro

  • Managers anticipate price movements, typically relying on fundamental/economic data
  • Flexible and unrestricted
  • Seeks opportunities regardless of borders or asset class
  • Top-down investment approach

Long/short equity

  • Invests long to potentially capitalize on equity price appreciation
  • Invests short to hedge and/or produce returns from prices decreasing
  • Managers generally rely on stock-picking abilities and bottom-up analysis

Emerging markets multi-strategy

  • Invests in securities traded in developing economies
  • Invests in both long and short positions in multiple asset classes
  • Higher risk/reward profile


  • Invests primarily in equity and corporate debt
  • Focuses on event-driven arbitrage, turnaround, and special situations investing
  • Managers use top-down and bottom-up investment style


  • Invests in a variety of alternative strategies in one portfolio
  • Shift exposures depending on market opportunity
See the Glossary for term definitions.