How to diversify your portfolio to protect yourself from market risks? (13/20)

Alternative strategies

There is still one asset class that H. Browne has not addressed, that of hedge funds. These use many strategies to try to generate absolute returns. The oldest, the majority and the best known of their approaches is to take a short and/or long position on certain securities. Hedge funds are known for being decorrelated from the market and offering positive performance at all times, at least in principle… We also remember that sometimes they make you lose everything (isn't that right Mr. Madoff…).

Hedge funds are generally reserved for institutional clients or large fortunes. That being said, anyone can tame some of their tools, in particular short selling and leverage, to varying degrees of success. I also offered a strategy on this site aimed at playing in the direction or against the market, before I had to interrupt my paid services because of my data provider. Personally, I continue to use this type of strategy nonetheless. If you are not an institutional investor, if you do not have a large fortune and if you are not comfortable with short selling or other alternative techniques, you can always fall back on the ALFA ETF, but the performance is not extraordinary. More generally, let us note that these approaches are not without risks and that it is better to know what you are exposing yourself to when you get involved.

Les stratégies alternatives visent à obtenir une rentabilité absolue, indépendamment de l’évolution des autres actifs. Le rapport entre l’or, l’immobilier, le cash, les obligations et les actions est utile et nécessaire car il permet d’évaluer ceux qui se sont valorisés ou ceux qui se sont dépréciés et donc d’arbitrer entre eux. Les stratégies alternatives, telles que l’approche long/short doit être par contre gérée indépendamment du portfolio type d’allocations d’actifs. Il faut y attribuer un montant et « jouer » avec sans tenir compte des autres actifs.