Investors' Rationale Shifts From Alpha

Investors' Rationale Shifts From Alpha

March 2014

Investors' Rationale Shifts From Alpha play

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Diversification now drives alternative investment decisions, according to the majority of participants in BNY Mellon's latest survey since 2005. Alpha used to be the #1 objective.

BNY Mellon's 2013 study of the risk practices of 100 institutional investors yields surprising insights. New Frontiers of Risk: Revisiting the 360° Risk Manager documents the shifts since 2005, when BNY Mellon published its first whitepaper in the series. BNY Mellon partnered both times with Nobel laureate Harry Markowitz, Ph.D., the economics and finance innovator.

Alternatives: Test Before You Invest

Asked why they invest in alternatives, the majority of participants in BNY Mellon's study of 100 institutional investors answered to increase diversification benefits.

"We think that was the 'wow moment' in our paper for 2013," says Debra Baker, Head of Global Risk Solutions. "In 2005, the number-one reason was to gain alpha."

But what will alternatives — layered in with traditional assets — do to a plan? And how do you find out? Debra and Dr. Harry Markowitz, the father of Modern Portfolio Theory, have answers.

Watch the video to learn more.

When it comes to alternative investing, and we define alternatives as private equity, real estate, commodities, hedge funds, could be venture capital. We think that the “wow moment” in our paper for 2013 was the rationale for investing in those types of asset structures and asset classes.

Debra Baker, Head, Global Risk Solutions, BNY Mellon Asset Servicing

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