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July 18, 2024
PI Global Investments
Alternative Investments

Understanding The Alternative Investment Landscape

Alternative investments by their nature involve a substantial degree of risk, including the risk of total loss of an investor’s capital. Further, alternative investments are subject to less regulation than other types of pooled investment vehicles, may be illiquid, and cannot assume that investments in the asset classes identified will be profitable or that decisions we make in the future will be profitable. Alternative investments may also involve significant use of leverage, making them substantially riskier than other investments.

Alternative investing involves substantial risk and there is an opportunity for significant losses. The products may not be suitable for all investors. Compared with a traditional mutual fund, an alternative fund typically holds more nontraditional investments and employs more complex trading strategies. Investors considering alternative mutual funds should be aware of their unique characteristics and risks. Alternative investments may also have limited performance information, low liquidity, and unproven strategies with unknown risks.

Exposure to investments in commercial real estate, residential real estate, transportation, healthcare loans, and royalty-backed credit and other asset-based lending, including distressed loans, may also subject the fund to greater volatility than investments in traditional securities. Investments in distressed loans are subject to the risks associated with below-investment-grade securities. In addition, when a fund focuses its investments in certain sectors of the economy, its performance may be driven largely by sector performance and could fluctuate more widely than if the fund were invested more evenly across sectors. The fund’s investment strategy may not produce the intended results. 

Diversification does not guarantee a profit or eliminate the risk of a loss. 

Alpha measures the difference between an actively managed fund’s return and that of its benchmark index. An alpha of 3, for example, indicates the fund’s performance was 3% better than that of its benchmark (or expected return) over a specified period of time. A long position is an investment that is purchased with the expectation that it will increase in price over time. A short position is an investment that is purchased with the expectation that it is likely to fall in price in the near future. Futures are derivative financial contracts obligating the buyer to purchase or the seller to sell an asset at a predetermined future price and date. Swaps are over-the-counter derivative agreements between private parties to exchange the cash flows or liabilities from two different financial instruments. Options are contracts that give the contract holder the right to buy or sell a financial product at an agreed-on price for a set period of time.

This material is for informational purposes only and is not intended to be, nor shall it be interpreted or construed as, a recommendation or providing advice, impartial or otherwise. John Hancock Investment Management and our representatives and affiliates may receive compensation derived from the sale of and/or from any investment made in our products and services.

The views presented are those of the author(s) and are subject to change. No forecasts are guaranteed. This commentary is provided for informational purposes only and is not an endorsement of any security, mutual fund, sector, or index. Past performance does not guarantee future results.


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