Nowhere to Hide: Navigating Rising Rate Risk in High-Yield Markets
Over the past few years, investors have flocked to high-yield credit, many believing it a good way to mitigate their interest rate risk as well as capture additional yield. However, they may not realize the level of rate risk that has followed them.
As institutional interest in alternative investments has increased, the goal of alternatives portfolios, and indeed, even the definition of “alternatives,” has evolved over time. This paper discusses the evolution of alternatives portfolios, and proposes that the next step in this evolution is the incorporation of risk premia strategies within an alternatives portfolio. Risk premia strategies allow alternatives investors access to a broad diversified set of risks, which often are the ultimate drivers of the potential diversification benefits of alternatives portfolios. This risk premia “core” can serve as a complement to investors’ best hedge fund ideas within an alternatives portfolio.
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