Transcript: Guide to portfolio construction — alternative investments

[CIBC Asset Management logo]

[Soft music playing]

[Guide to portfolio construction] 

[A pie chart graphic appears spinning, with each segment of the pie given a number and a different title. It stops and highlights number 4: Alternatives.]

[Michael Sager appears on screen in an office setting]

[Michael Sager, Vice President, Multi-Asset & Currency

CIBC Asset Management]

Michael Sager: In a world of relatively low expected returns to equities and bonds, it becomes more challenging to meet your investment goals and long-term performance objectives in a traditional equity-centric portfolio. 

[A financial advisor pointing to a pie chart on a white board in a large board room. Five people are seated around a board room table, watching his presentation.]

A lot of investors are trying to solve this challenge by embracing alternatives.

[“Alternatives” covers a range of different asset classes and investment strategies.]

The descriptor, “alternatives,” covers a range of different asset classes and investment strategies. 

[An aerial shot of a residential neighbourhood.]

Real estate… 

[A computer-generated (CG) image of gold bars being produced.] 

Gold… 

[Time-lapse shots of downtown Ho Chi Minh City at night.]

Emerging market bonds and liquid alternatives are all examples of alternative investments.

To me, alternatives are like a jigsaw or a mosaic. 

[A hand placing a puzzle piece in an all-white puzzle. A CG image of a gray mosaic pulsating on screen.]

Each one offers something slightly different to an investor's portfolio. 

[Opportunities offered by alternatives:

  • Ability to increase expected returns
  • Reduce volatility
  • Increase your income stream]

The opportunities offered by alternatives include an ability to increase expected returns, to reduce the volatility of your investment portfolio, and to increase the income stream you get from your investments.

[A financial advisor talking to a client while looking over papers and a tablet. A CG image of silver houses popping up on a gray background, eventually joined by a red house in the middle.]

Investors are increasingly focused on alternatives and the opportunities they offer. You think about a traditional balanced portfolio, it's very focused on equity risk. 

[A CG image of a line chart, which is overlayed over a map of South America, moving upwards and then down.]

That means that it performs very well when equities do well, typically, when economic growth is strong. It does less well when economic growth is a little bit weaker. So, it's very concentrated in its performance. 

[Why to invest in alternatives: 

  • Reduce portfolio concentration
  • Diversify away from equity risk
  • Introduce other opportunities to add value]

The reason to think about investing in alternatives is to reduce that portfolio concentration. To diversify away from having primarily equity risk, introduce other risks, other opportunities to add value. To make sure that the probability of losing capital during periods of equity stress is as low as possible. 

[Time-lapse shots of downtown Toronto at night.]

[By adding alternatives, you achieve a more diversified, balanced and broad opportunity set.]

So, by adding alternatives, you end up with a much more diversified, balanced and broad opportunity set that can really help you better achieve your investment objectives for the long-term.

[CIBC Asset Management logo]

[This document is provided for general informational purposes only and does not constitute investment advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. All opinions and estimates expressed in this document are as of the date of publication unless otherwise indicated, and are subject to change. CIBC Asset Management Inc. uses multiple investment styles for its various investment platforms. The views expressed in this document are the views of Michael Sager and may differ from the views of other teams. The information does not constitute legal or tax advice.

®CIBC Asset Management and the CIBC logo are registered trademarks of Canadian Imperial Bank of Commerce (CIBC), used under license.

The content of this presentation is proprietary and should not be further distributed without prior consent of CIBC Asset Management.]

This video was created on 08/28/2020.