Where can investors get "alpha" during a market crash ορ ?
Current situation:
Now that markets are crashing around the world every investor is looking for haven assets, or sources of "Alpha". And so did I. I am currently invested into equities, mostly through index tracking ETFs (I find Robinhood very easy to use and also Vanguard's online trading), which has been proven very profitable for the past 6 years, however, it is no rocket science that current environment is changing. So, I am also looking to switch 40% of my portfolio to alpha-generating assets, that can support my investments during for the time being. Below are my thoughts.
Gold - My first thought was GOLD:
Since my very early ages I knew gold was a very good diversifier. However, this has started to change and during the latest crash I observed gold falling together with stocks during the first days. My intuition sees two main reasons behind that move:
- Typical liquidity crunch. Fund managers losing money in equities, have to lower positions elsewhere - similar to the triggering of the "Quant Meltdown of Aug 2007".
- Investors' aggregate perception of gold has changed. As investing has switched away from the traditional allocation strategies and market intervention is now common, investors no longer consider gold to be a safe haven.
Hedge Funds - My second thought was long/short Hedge Funds:
I 've had a look into the performance of some Hedge Funds and I have to admit that the majority of them did much better than expected over the past months. In fact 90% of Hedge Fund managers seems to have out-performed the market and many of them actually did very well. My main problem is that as an investor, I would like to diversify the 40% of my portfolio into a few funds, instead of one, which is impossible given the entry tickets these HFs have. I have found a platform that offers market-neutral Hedge Fund portfolios (Daedalus), with very low minimums. I didn't know the funds on the platform before. They have very good performance and actually did pretty well over the past 3 months too. Could this be attributed to their smaller size (I think most of them are
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