Alternative funds, attractive returns despite tariffs and geopolitical conflicts
However, one must select well with particular attention to volatility and high costs
3' min read
3' min read
Getting returns with falling markets. The wish of many, of course, but alternative funds could really optimise portfolios in this direction. In a market environment that is increasingly difficult to decipher (tariffs, geopolitical conflicts), traditional 'long only' strategies are indeed showing all their limits. Alternative funds, on the other hand, are carving out a growing space in diversified portfolios precisely because of their ability to decouple themselves from equity benchmarks. Among the various strategies adopted, two deserve particular attention: long/short equity and market neutral.
The differences
.Long/short funds combine 'long' positions on undervalued securities (hence to buy) with 'short' positions on securities deemed overvalued (hence to sell). The objective is not to beat an index, but to generate a positive absolute return by exploiting relative inefficiencies between securities. Some funds maintain a positive net exposure, others are more flexible or directional.
Market-neutral funds, on the other hand, seek to neutralise the impact of the market trend as a whole and to do so they offset the long component with the short component. The result is a net exposure close to zero, ideal for those seeking low volatility and protection in uncertain market phases.
5-year yields
.Over a 5-year horizon (i.e. from the pandemic onwards), returns among instruments adopting these strategies are very differentiated. Among the best is Liontrust Gf European Strategic Equity, with a cumulative return of +124.57%, followed by Jupiter Merian Global Equity Absolute Return (+73.65%) and Gam Star Composite Global Equity (+62.77%). These funds combine European or global long/short approaches (or market neutral as in the case of the Jupiter fund) and show how active management can, in some cases, generate value even in complex scenarios. It is precisely in these turbulent times that these funds perform well, in some cases outperforming market benchmarks.
10-year yields
.While alternative strategies have excelled over the five years due to increased market volatility and uncertainty, returns are more moderate on average over the decade. The best fund in the ranking recorded +114% (see table), but several products are on much lower and, in some cases, negative values. "This," emphasises Vincenzo Cagnetta, analyst and independent financial advisor at Studio Enca, "reflects a structural characteristic of these strategies: they perform best in turbulent or discontinuous market contexts, where the long/short or market neutral approach can exploit inefficiencies and dispersion among securities. In more directional and linear phases, such as those that characterised much of the post-2013 decade, their ability to generate alpha tends to diminish'.
