Solidifying liquid alternatives

In a market environment where it feels as if nothing is working, liquid alternatives offer valuable opportunities.

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July 28, 2022 | 20 minute read

About this episode
In today’s unpredictable environment, investors are seeking ways to build portfolios that can perform well without acing the entire macro call. We believe well-constructed liquid alternatives have the potential to do just that. In this episode, Investment Research Director Kara O’Halloran is joined by Liquid Alternatives Investment Specialist Beth Anne Byrne to discuss what goes into a liquid alternative strategy, how they offer the potential to generate non-beta reliant returns and, importantly, how they fit into well-diversified portfolios.

Transcript excerpt:

[00:00:05] Beth Anne Byrne:

I think it’s arguably solidified the need for at least a 20% alternative allocation, you know, going into the future, your 40 is broken and now your 40 is breaking your 60.

[00:00:24] Kara O’Halloran:

Welcome back to FireSide a podcast from FS Investments. My name is Kara O’Halloran, and I’m a Director on the Investment Research team. Here it is, mid-July, meaning we just wrapped up the first half of 2022. And what a six months it’s been. Traditional markets have been on a relatively unrelenting decline for much of the year, racking up a number of worst ever stats. The S&P 500 was down almost 20% as of June 30th. It’s the worst start to a year since 1962. Fixed income has suffered as well. The Barclays Agg is down over 10%, more than tripling its worst annual decline on record, and the 60/40 portfolio lost over 16%, its worst start to a year in history.

[00:01:05] Kara O’Halloran:

There’s been this narrative throughout markets that nothing works this year, but there are some things that have shown their worth lately, specifically liquid alternatives. So on today’s episode, we are pulling back the curtain a little bit and talking about why liquid alts have worked this year, when really not much else has. Why investors are turning to liquid alternatives now, and more importantly, why it’s not too late to consider these diversifying assets. To walk through all of this I am joined by Beth Anne Byrne, the Liquid Alternatives Investment Specialist here at FS Investments. Beth Anne, thanks for joining.

[00:01:38] Beth Anne Byrne:

Thanks Kara. It’s an honor to be here as always.

[00:01:41] Kara O’Halloran:

So I just ran through how challenging markets have been this year. And really, I feel like that list doesn’t even cover it. It’s just been this unrelenting volatility. But a lot of liquid alternatives, or more specifically, I really wanna talk about how multi-strategy liquid alts are doing really well this year. So I think we’re all kind of wondering how? Right? So at a, a really high level to start, can you just walk us through why you’re seeing these funds have success this year?

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All views, opinions and positions expressed herein are that of the author and do not necessarily reflect the views, opinions or positions of FS Investments. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

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Beth Anne Byrne

Liquid Alternatives Investment Specialist

Kara O’Halloran, CFA

Director, Investment Research

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