How innovative thinking can de-risk your portfolio

He said more advisors should consider alternatives, particularly liquid alternatives, because they have performed better than fixed income with some having positive returns in this down market.

“They clearly played a serious, positive role within the quarter for those who were using them within their assets,” said Sabourin.

“So, that was a great test for the odds, but you have to choose which one fits best with your investment philosophy or your investment goals. That’s what I mean by the bicycle analogy. Adding alternatives to a bond and equity portfolio really helps to reduce the volatility within your portfolio and keep a decent return overall.”   

Sabourin noted that alternatives help to protect in the downside, even in a choppy market, which will be important in this third quarter, particularly since they’ve had a good start since last Friday.

“If you use them properly within your asset mix, it makes a lot of sense,” he added, “because it reduces volatility and helps your portfolio do a better job, performance-wise. And that’s the name of the game. It’s a little bit more work, for sure, for the advisor and for portfolio managers like us. But, in the end, the client deserves it.”