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From where do you fund alternative investments? Investors often wonder how to fund alternative
investments. Well, it depends on the alternative investment that’s being funded and the objective.
Some alternative investments are more growth oriented and those tend to be funded from
the equity portion of a portfolio. Others tend to be more income, credit or risk minimizing
in their orientation and those tend to be funded from the fixed income portion of the
portfolio, but not all alternative investments fall into a single category.
Other alternative investments have the opportunity to go anywhere. They’re opportunistic in
nature and they can invest in equities, bonds, credit, currency, commodities. They can really
roam the universe and those tend to be funded on a pro rata basis or in part from equity
and in part from fixed income. So it really does depend upon the alternative investment
that’s being funded and the objective of the alternative investment.
DISCLOSURE Content is provided for information purposes
only and is not intended as investment advice nor is it a recommendation to buy or sell
any particular security. Any discussion of particular topics is not meant to be comprehensive
and may be subject to change. Any investment or strategy mentioned herein may not be suitable
for every investor. Factual information has been taken from sources we believe to be reliable,
but its accuracy, completeness or interpretation cannot be guaranteed. Past performance is
not indicative of future results. Information and opinions expressed are those of the presenter
and may not reflect the opinions of other investment teams within William Blair & Company,
L.L.C.’s Investment Management division. Information is current as of February 3, 2014
and subject to change without notice. Alternative investments may use investment
techniques and financial instruments that are considered aggressive and typically involve
a high degree of risk. Such techniques may include short sales or other strategies that
are intended to provide inverse exposure to a particular market or other asset class,
as well as leverage and may subject a portfolio to potentially dramatic changes (including
losses) in a portfolio’s value. Alternative investments commonly include the use of derivatives,
or investments where the investor does not own the underlying asset, but instead makes
a bet on the direction of the price movement of the underlying asset. Examples of derivatives
include options, swaps, futures and forward contracts. Derivatives are generally used
as an instrument to hedge risk but also can be used for speculative purposes. There are
various types of risks associated with derivatives such as market risk, liquidity risk, credit
risk, legal risk and operations risk. These investments are intended for sophisticated
investors who are willing to bear the loss of their entire investment and may not be
suitable for all investors. © William Blair & Company, L.L.C