J.P. Morgan Asset Management walks through the role of alternative investments in portfolios, framing them as tools for diversification, income, and return enhancement beyond the traditional 60/40 mix. The paper leans into a key tension: while alternatives can improve outcomes, dispersion and access complexity mean outcomes vary widely, with top quartile managers outperforming by a meaningful margin.
Guide to Alternatives 1Q 2021
J.P. Morgan Asset Management
David Lebovitz
Research
51 Pages
Key Takeaways
Diversification Benefits Persist: Alternatives show correlations as low as -0.2 to 60/40 portfolios, improving diversification across regimes with average correlations near 0.1 over long periods.
Return Dispersion Matters: Manager dispersion in private markets spans roughly 9% to 20% between top and bottom quartiles, reinforcing that manager selection drives outcomes more than asset class
Portfolio Efficiency Gains: Adding 20% alternatives increased returns from 7.2% to 8.4% while volatility rose more modestly from 9.9% to 10.8%, improving risk-adjusted outcomes.
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