Morgan Stanley IM: Alternative Investments

With the “democratization” of alternatives, many individual investors now have access to investment strategies that have the potential to improve performance and diversification.

KEY TAKEAWAYS:

1. Alternative investment strategies may potentially improve performance of and add diversification to 60/40 portfolios.
2. These strategies are no longer the exclusive domain of institutions and wealthy individuals.
3. With the “democratization” of alternatives—the introduction and evolution of client-friendly vehicles—many individual investors now have access to these strategies.
4. Financial Advisors should know the value proposition of alternative investments in order understand how allocating to them may help strengthen client portfolios.

Overview of the Alternative Investment Landscape
The term “alternative investments” is broad and, in our view, not particularly descriptive or useful. It encompasses all strategies that cannot be accessed through traditional equity and fixed income solutions. These strategies have the potential to address many of the challenges that investors face today—the need for enhanced income, inflation protection, diversification, and stability amid volatile markets.

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^{Risk Considerations}

^{There is no guarantee that any of the investments listed above resulted in positive performance (for realized holdings) or will perform well in the future (for current holdings). The trademarks and service marks above are the property of their respective owners. The information on this website has not been authorized, sponsored, or otherwise approved by such owners.}

^{The information presented herein is solely for informational and educational purposes only. It is intended for the benefit of third-party issuers and those seeking information about alternatives investment strategies. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction in which such offer or solicitation, purchase or sale would be unlawful under the securities, insurance or other laws of such jurisdiction.}

^{The information presented does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy. The information herein has not been based on a consideration of any individual investor circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. To that end, investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision. There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market.}

^{Diversification does not protect you against a loss in a particular market; however it allows you to spread that risk across various asset classes. Past performance is no guarantee of future results.}

^{Alternative investments are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. Alternative investments are suitable only for long-term investors willing to forego liquidity and put capital at risk for an indefinite period of time. Alternative investments are typically highly illiquid – there is no secondary market for private funds, and there may be restrictions on redemptions or assigning or otherwise transferring investments into private funds. Alternative investment funds often engage in leverage and other speculative practices that may increase volatility and risk of loss. Alternative investments typically have higher fees and expenses than other investment vehicles, and such fees and expenses will lower returns achieved by investors.}

^{In the ordinary course of its business, Morgan Stanley engages in a broad spectrum of activities including, among others, financial advisory services, investment banking, asset management activities and sponsoring and managing private investment funds. In engaging in these activities, the interest of Morgan Stanley may conflict with the interests of clients.}

^{Alternative investment funds are often unregulated, are not subject to the same regulatory requirements as mutual funds and are not required to provide periodic pricing or valuation information to investors. The investment strategies described in the preceding pages may not be suitable for your specific circumstances; accordingly, you should consult your own tax, legal or other advisors, at both the outset of any transaction and on an ongoing basis, to determine such suitability.}

^{No investment should be made without proper consideration of the risks and advice from your tax, accounting, legal or other advisors as you deem appropriate.}