Laurence Allen: Best and Worst Alternative Fund Strategies in an Economic Recession

If you expect an economic recession and want to rebalance your alternative fund portfolio to mitigate the damage, here are some lessons from the 2008 recession.

  1. Alternative fund strategies worldwide generated negative 1 year median returns in 2008. For perspective, in 2008, the S&P 500 Index returned -35.6%.
  2. The 3 best performing alternative fund strategies generated median returns of approximately -6% to -11%:
    • Mezzanine
    • Infrastructure
    • Natural Resources
  3. The 3 worst performing alternative fund strategies generated median returns of approximately -27% to -40%:
    • Real Estate
    • Distressed Debt
    • Buyout
  4. The 3 alternative fund strategies that generated the highest returns in the 2009 recovery:
    • Distressed Debt
    • Distressed Private Equity
    • Private Debt

In 2009, the S&P 500 Index returned approximately +25.9%. However, Real Estate, Infrastructure and Mezzanine continued to generate negative 1 year returns in 2009, while Private Equity, Buyout and Venture each generated positive returns – along with the strategies mentioned in point 4 above.

This may be a good time to think about allocations to alternative fund strategies.

Sources: Bloomberg, Laurence Allen. 

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Disclosure: This information is market commentary by Laurence Allen and not a solicitation of private securities transactions which may only be done through private offering documents and in jurisdictions where permitted. Investors should not rely on the information in this commentary as the basis for making investment decisions. This commentary is provided for informational purposes only. You are strongly encouraged to consult with your own independent advisors regarding any issues discussed in this commentary.

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