Alternative investments describe asset classes that differ from the traditional asset types—stocks, bonds and cash—and range from commodities, real estate, timber, hedge funds, and private equity to collectibles. Alternative investments are used to reduce overall portfolio risk through asset class diversification based on historic low correlation with traditional investments as well as a potential hedge against inflation.
Perkins Coie Trust Company incorporates judicious allocations (typically less than 10%) to commodities and real estate in its asset allocation strategy for most clients. We use either carefully selected mutual fund or exchange-traded funds to gain exposure to these asset classes. We may provide access to additional asset types such as timber funds, hedge funds of funds and private equity funds of funds for significant portfolios that can meet the high investment minimums associated with these private investments. Alternative investments typically require a high degree of due diligence in selection, and we conduct extensive analysis on any of these investments used in client portfolios.
Four distinct benefits of alternative investments include, diversification potential, inflation hedge, new exposures and opportunities, and higher returns.