Originally Posted: December 6th, 2010
“The house always wins” is a favorite Vegas saying. This is the takeaway for me from the latest allegations that the stock market may be facing the largest investigation in scope and magnitude into insider trading ever.
Earlier last week, the U.S. Securities and Exchange Commission requested more information from asset management giants Wellington Management and Janus Capital as well as hedge fund titans SAC Capital and Citadel Investment Group regarding insider trading.
While this investigation is on-going and will surely be extended to more companies and individuals, it will likely further erode the confidence in the system. U.S. stock mutual funds, which are largely funded by retail investors (like you and me), have seen a net $50 billion disappear so far in 2010.
“While the rule isn’t that everyone has the same information, the rules do say it’s not a rigged deck,” said Tom Gorman, a former staff member at the Securities and Exchange Commission’s Enforcement Division. “How many times do you want to hear the deck is rigged before you decide you don’t want to play?”
There are other options out there that can level the playing field. Diversifying into other alternative investments will provide a more balanced approach to your investment goals without the worry of the stock market’s volatility or cloud of suspicion. More investors are flocking to these opportunities. .
According to Callan’s 2010 Alternative Investments Survey fund sponsors’ total portfolio allocations to alternative investment strategies nearly doubled from 11% in 2005 to 20% in 2010 as they sought greater diversification and improved returns. That percentage is expected to jump to 24% by 2012.
Survey respondents overwhelmingly chose real estate followed by private equity (69%) and hedge funds (52%). The survey is all inclusive covering commodities, infrastructure, portable alpha, socially responsible investments, timberland, TIPS, and agriculture.
While the Grinch may have stolen the stock market, our Santa has plenty of alternative investments in his bag this holiday season.
Darren Nakos, CCIM
Resort Realty Capital
111 Main St
P.O. Box 630
Frisco, CO 80443-0630