Why Alternatives?

Ability to navigate
challenging markets

Balance is the path that should lead to capital preservation, and hedge funds can provide key benefits for a well-positioned portfolio. They offer diversification and an opportunity to navigate challenging markets. We believe the best hedge funds are led by experienced, skilled managers, and designed to:

  • Target absolute returns in ever-changing market environments
  • Have flexibility to invest in multiple strategies, markets & asset classes
  • Hedge portfolio in an attempt to minimize impact of market volatility & drawdowns
  • Employ active investment & risk management

Diversification using alternative investment solutions can potentially serve as a sea anchor to wind in a well-positioned portfolio.

Sophisticated Hedge Fund managers possess the skill sets & expertise to navigate global systemic shocks and periods of economic stress.

Adding a core allocation to diversified alternative investments has historically enhanced return and reduced risk of a traditional stock and bond portfolio.

Institutional and high net worth investors have traditionally allocated substantial capital to hedge funds because they seek to:

  • Generate superior risk-adjusted performance through active, skill-based investing
  • Invest both long & short in an attempt to profit regardless of market direction
  • Reduce portfolio volatility when combined with traditional asset classes
  • Provide enhanced portfolio diversification & lower market correlation
  • Utilize multiple investment strategies & techniques as they seek to minimize risk and target stable returns
  • Invest in financial instruments & global markets not easily accessible through traditional investment products

Hedge Funds As Compared With Other Asset Classes

Value of $1,000 invested 01/01/1995 - 06/30/2017

The above chart illustrates the performance of a hypothetical $1,000 investment made, on January 1, 1995, in each of the market indexes listed. The investments assume the reinvestment of all dividends and capital gains, but do not reflect any costs or fees associated with making an actual investment. Costs and expenses may vary. Also note that this chart does not imply any future performance. 'Hedge Funds' is represented by the HFRI Fund Weighted Composite Index, a global, equal-weighted index of over 2,000 single-manager funds that report to HFR Database. 'S&P 500' refers to the S&P 500 Total Return Index, a total return index that reflects both changes in the prices of stocks in the S&P 500 Index as well as the reinvestment of the dividend income from its underlying stocks. 'Nasdaq' refers to the NASDAQ Composite Index, a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. 'US Bonds' is represented by the Bloomberg Barclays US Aggregate Bond Index, a market-weighted index used to represent investment grade bonds being traded in United States. 'EAFE' refers to the MSCI EAFE Total Return Gross Index, a total return stock market index that is designed to measure the equity market performance of developed markets outside of the U.S. & Canada. 'Managed Futures' is represented by the DJ/CS Managed Futures Index, which tracks the performance of commodity trading advisors. Note: It is not possible to invest directly in an index. The Collins Long/Short Credit Fund launched March 2, 2015 and therefore has a limited track record.

Hedge Funds have historically outperformed equities, bonds and managed futures on a risk-adjusted basis, with less than half the volatility of equities.

01/01/1995 - 06/30/2017 Cumulative Return Value of $1,000 Annualized Return Annualized Standard Deviation (Volatility)
Hedge Funds1 480.95% $5,809 8.13% 6.71%
Equities2 712.64% $8,126 9.76% 14.72%
Traditional Equity, Bond Portfolio3 528.54% $6,285 8.51% 10.15%
Bonds4 251.83% $3,518 5.75% 3.51%
Managed Futures5 151.93% $2,519 4.19% 11.66%

The above chart illustrates the performance of a hypothetical $1,000 investment made, on January 1, 1995, in each of the market indexes listed. The investments assume the reinvestment of all dividends and capital gains, but do not reflect any costs or fees associated with making an actual investment. Costs and expenses may vary. Also note that this chart does not imply any future performance.

1 HFRI Fund Weighted Composite Index, a global, equal-weighted index of over 2,000 single-manager funds that report to HFR Database; 2 S&P 500 Total Return Index, a total return index that reflects both changes in the prices of stocks in the S&P 500 Index as well as the reinvestment of the dividend income from its underlying stocks; 3 A synthetic index composed of 60% S&P 500 Total Return Index, 40% Barclays Aggregate Bond Index, ; 4 Bloomberg Barclays Aggregate Bond Index a market-weighted index used to represent investment grade bonds being traded in United States; 5 DJ/CS Managed Futures Index which tracks the performance of commodity trading advisors. Note: It is not possible to invest directly in an index. The Collins Long/Short Credit Fund launched March 2, 2015 and therefore has a limited track record.

Adding an allocation of alternative investments to a core equity/bond portfolio has historically enhanced return and reduced risk.

01/01/1995 - 06/30/2017 Traditional Portfolio1 Traditional Portfolio with 20% Hedge Funds2 Traditional Portfolio with 30% Hedge Funds3
Value of $1000 Invested $6,285 $6,104 $5,936
Cumulative Return 528.54% 510.44% 493.60%
Annualized Standard Deviation4 10.15% 7.96% 7.26%
Annualized Return 8.51% 8.37% 8.24%
Sharpe Ratio5 0.60 0.73 0.78
Worst Drawdown6 -35.48% -28.07% -25.30%
 

The above chart illustrates the performance of a hypothetical $1,000 investment made, on January 1, 1995, in each of the market indexes listed. The investments assume the reinvestment of all dividends and capital gains, but do not reflect any costs or fees associated with making an actual investment. Costs and expenses may vary. Also note that this chart does not imply any future performance.

1 A synthetic index composed of 60% S&P 500 Total Return Index, 40% Bloomberg Barclays Aggregate Bond Index.

2 A synthetic index composed of 50% S&P 500 Total Return Index, 30% Bloomberg Barclays Aggregate Bond Index, 20% HFRI Fund-Weighted Composite Index.

3 A synthetic index composed of 40% S&P 500 Total Return Index, 30% Bloomberg Barclays Aggregate Bond Index, 30% HFRI Fund-Weighted Composite Index.

4 Here, standard deviation measures the volatility of monthly returns, assuming a normalized distribution of returns. The result is annualized by multiplying by the square root of 12.

5 This is the ratio of expected return in excess of a risk-free security to the standard deviation of those excess returns. A higher ratio is better.

6 This is the maximum historical negative performance, taken over one or more consecutive months, and measured relative to a starting high water mark.

Past performance does not guarantee future results. The time period chosen for the table reflects the inception of Collins Capital and shows multiple complete market cycles.