At times, the mark of a good financial advisor is the ability to accept a strong idea…and then wait patiently for it to emerge in the marketplace. That may be the case now with the concept of adding “alternative investments” to asset allocation programs. (For purposes of this article, we’ll define “alternatives” as hedge funds and managed futures programs.)

Hundreds of alternative programs are searching for financial advisor distribution, and they make a semi-compelling case: If you include alternative investments as one asset class in your allocation model and put 20% into it, overall portfolio volatility will be reduced and risk-adjusted returns will increase, based on historical results.

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