If the goal is to enhance returns, there are a number of different strategies to consider. Enhancers are a category of alternative strategies that mainly aim to amplify the returns, or mitigate the risks, of investing in a traditional asset class, thus achieving better risk-adjusted returns.
Enhancers target exposure to the same risks in traditional portfolios but seek to deliver better outcomes.
Different types of enhancers
Long Short Equity
Equity-like return potential with lower volatility, while seeking to mitigate downside risk.
Long Short Credit
A fixed income strategy that aims to maximize total return to investors through income and capital appreciation by investing primarily in corporate bonds, while mitigating capital loss through shorting and other hedging strategies.
Similar volatility to traditional equity markets, with an extended opportunity for return potential.
Enhancers are one of two broad categories within Picton Mahoney’s proprietary framework that helps investors zero in on their goals and prioritize what is most important to them. The other category is Diversifiers.
A goal-based framework for understanding alternative investments
- Return Amplifier
- Provide exposure to similar risks that are in traditional portflios, while seeking to enhance return or yield.
- Examples: 130/30 Active Extension, Private Equity, Private Credit
This information has been provided as a general source of information, is subject to change without notification and should not be construed as investment advice. This material should not be relied upon for any investment decision and is not a recommendation, solicitation or offering of any security in any jurisdiction. The information contained in this material has been obtained from sources believed reliable, however, the accuracy and/or completeness of the information is not guaranteed by PMAM, nor does PMAM assume any responsibility or liability whatsoever. All investments involve risk and may lose value. This information is not intended to provide financial, investment, tax, legal or accounting advice specific to any person, and should not be relied upon in that regard. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional.
There is no guarantee that a hedging strategy will be effective or achieve its intended effect. The use of derivatives or short selling carries several risks which may restrict a strategy in realizing its profits, limiting its losses, or, which cause a strategy to realize or magnify losses. There may be additional costs and expenses associated with the use of derivatives and short selling in a hedging strategy.