Alternative Investments Deserve A Close Look For Some

Brian Selzer

OCEAN CITY — We expect returns from traditional asset classes to be more moderate going forward, accompanied by greater volatility. This will compel investors to manage portfolio risk more carefully and look for alternative sources of return. While not appropriate for everyone, we believe Alternative Investments (AI) can help.

AI strategies can be used to take advantage of current market opportunities, including higher volatility, and longer term opportunities for enhanced returns. Alternative Investments are not a homogeneous group of assets; rather,

they offer various ways to target particular objectives, depending on investors’ goals. Depending on the strategy, they have the potential to mitigate portfolio volatility, provide uncorrelated sources of return, or access exclusive markets. However, these benefits must be weighed against the relevant risks and limitations.

The stop-and-start global economic recovery and uncertain policy outlook for central banks suggest that the road ahead will be much bumpier than it has been over the last several years, as the markets have been largely devoid of any significant selloffs. The recent rise in volatility in the currency and commodity markets

are examples, and if skillfully managed, they could generate attractive long-term return for investors.

High volatility also creates the potential for more variation in company fundamentals across industries, countries, and asset classes. AI strategies that can skillfully navigate such dispersion, such as equity long/short and relative value credit, are likely to benefit.

We believe various strategies, including private equity, real estate, and distressed debt can offer higher potential returns by committing capital to unique opportunities over longer time horizons.

Academic research has estimated the historical “premium” generated by the illiquidity of such investments at more than 3% annually. Additionally, these strategies are well-positioned in the current environment of tighter lending standards in traditional lending channels and increased demand for funding by private ventures and real estate companies.

At the same time, cash on corporate balance sheets has grown to record levels, given rising sales and profits. Companies have looked to use this cash for deal-making, including mergers, acquisitions and divestitures, and we expect this higher level of activity to continue. Event-driven and merger arbitrage hedge funds, as well as private equity buyouts and venture capital, are examples of strategies that can position investors for such opportunities.

It is important to note that, while there are significant advantages to Alternatives Investments, they are also complex strategies that carry risks above and beyond those associated with traditional assets, and are therefore not suitable for all investors. Certain strategies and techniques used to enhance returns (e.g., short selling, leverage, investing in illiquid assets and securities, etc.)

can also potentially increase investment risks, including the loss of

principal. Before investing in AI, clients should consider their overall financial situation, how much money they have to invest, their need for liquidity, and their tolerance for risk.

(A Merrill Lynch Wealth Management Advisor who can be reached at 410-213-8520.)

A Week In Business

  New Medical Center Opening Celebrated BERLIN –   Atlantic General Hospital and Health System held a grand opening and ribbon cutting at Atlantic General Medical Center in West Ocean City on Thursday. The Atlantic General Medical Center is home to the offices of Munna Garg, M.D., a specialist in internal medicine and pediatrics, Danielle Orr, M.D., a family practitioner, and pediatricians … Continue reading

A Week In Business

The Ocean Pines and Ocean City Chambers of Commerce held a ribbon cutting ceremony on Monday for the new Your Doc’s In at 12385 Ocean Gateway in West Ocean City. A grand opening scheduled for Saturday, June 27. Pictured, holding the ribbon from left, are Ocean Pines Chamber of Commerce Executive Director Ginger Fleming, Worcester County Commissioner Bud Church, Your … Continue reading

Open Houses Of The Week

OPEN HOUSE FRIDAY, JULY 3RD, 2-6pm   108 Peachtree Road, Montego Bay, North Ocean City   Wow! This must-see waterfront home is priced to sell! Fully furnished, 3 bedroom 2 bathroom home in Montego Bay community of Northern Ocean City. Built in 2005, the home at this desirable location is just 2 blocks to the beach. Master bedroom includes a … Continue reading

A Week In Business

Seminar Attended OCEAN CITY — Harry B. How III and Michael J. Wood of MAD Engineering Inc. recently participated in a seminar in Wilmington, Del. on Structural Forensic Engineering. This day-long class covered the causes of structural failures, which include material deficiencies, design errors, excessive loading, and deterioration. It also discussed the forensic investigation process for various types of structures. … Continue reading

Open Houses Of The Week

OCEAN CITY Broad Marsh 70th Street Bayside Mon-Sat 10-5 Sun 12-5 3BR/2FB/2HB Townhomes The Fritschle Group/ Condominium Realty 410-524-6400   WEST OCEAN CITY Villas at Inlet Isle Daily 11-3 Waterfront THs 3BR/4BA PJ Aldridge The Fritschle Group/ Condominium Realty 410-251-7562   OCEAN CITY The Gateway Grand Oceanfront 48th Street Daily 10-5 Fully Furnished 3-4BR/3BA Condos & Penthouses The Fritschle Group/ … Continue reading

Maintain Perspective When Near-Term Volatility Surfaces

OCEAN CITY — U.S. stocks have been resilient this year but the summer months may prove noisy. We remain constructive on them in the medium term, but believe the risks of a pullback in the near term have grown. As such, investors, especially those with overweight positions relative to their strategic allocations, should be prepared to navigate near-term volatility. The … Continue reading

A Week In Business

Partnership Awarded BERLIN – Atlantic General Hospital was presented with a CTE Award of Excellence by the Maryland State Department of Education (MSDE) for its partnership with the Worcester Technical High School on a project to design a Personal Protective Suit (PPS) with telemedicine capabilities. The CTE Awards are sponsored by MSDE and recognize business partners, teachers and other organizations … Continue reading

Open Houses Of The Week

OCEAN CITY Broad Marsh 70th Street Bayside Mon-Sat 10-5 Sun 12-5 3BR/2FB/2HB Townhomes The Fritschle Group/ Condominium Realty 410-524-6400   WEST OCEAN CITY Villas at Inlet Isle Daily 11-3 Waterfront THs 3BR/4BA PJ Aldridge The Fritschle Group/ Condominium Realty 410-251-7562   OCEAN CITY The Gateway Grand Oceanfront 48th Street Daily 10-5 Fully Furnished 3-4BR/3BA Condos & Penthouses The Fritschle Group/ … Continue reading

A Week In Business

Linda Hearn, director of senior services for Wicomico County and secretary for the Wicomico County Commission on Aging, presented a “Celebrating Aging Award” last month to Apple Discount Drugs President Jeff Sherr.         President Recognized SALISBURY — Apple Discount Drugs announced President Jeff Sherr has been honored with the “Celebrating Aging Award” from the Wicomico County Commission … Continue reading