Alternative Investing

A Better Alternative: Diversify Your Diversifiers

Topics - Alternative Investing Portfolio Construction Portfolio Risk and Performance

${ numberSection } ${ text }
A Better Alternative: Diversify Your Diversifiers

Over the last decade stocks and bonds posted above-average returns with below-average risk. 1 1 Close The 2012 – 2021 average return for the U.S. 60/40 portfolio was 10.2% and volatility was 7.4%, vs a 4.3% average return and 11.0% volatility during the 1900 – 2011 year period. U.S. 60/40 is represented by 60% MSCI USA Index and 40% Barclays U.S. Aggregate Index.   After this extended party may come a long hangover, as investors today face anemic 5-10 year returns in traditional asset classes.

Some liquid alternatives represent an attractive option but come with their own challenges: many have not provided meaningful diversification, and “line-item risk” in individual strategies can be hard to weather. Our solution is to focus on truly diversifying alternatives and diversify across them – resulting in returns that may be less volatile, and a portfolio that may be easier to stick with.

AQR Capital Management, LLC, (“AQR”) provide links to third-party websites only as a convenience, and the inclusion of such links does not imply any endorsement, approval, investigation, verification or monitoring by us of any content or information contained within or accessible from the linked sites. If you choose to visit the linked sites, you do so at your own risk, and you will be subject to such sites' terms of use and privacy policies, over which has no control. In no event will AQR be responsible for any information or content within the linked sites or your use of the linked sites.

The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of AQR Capital Management, LLC, its affiliates or its employees. This information is not intended to, and does not relate specifically to any investment strategy or product that AQR offers. It is being provided merely to provide a framework to assist in the implementation of an investor’s own analysis and an investor’s own view on the topic discussed herein. Past performance is not a guarantee of future results.


Hypothetical performance results have many inherent limitations, some of which, but not all, are described herein. The hypothetical performance shown was derived from the retroactive application of a model developed with the benefit of hindsight.  Hypothetical performance results are presented for illustrative purposes only.


Diversification does not eliminate the risk of experiencing investment loss.


Certain publications may have been written prior to the author being an employee of AQR.

This material is intended for informational purposes only and should not be construed as legal or tax advice, nor is it intended to replace the advice of a qualified attorney or tax advisor.


AQR Capital Management is a global investment management firm, which may or may not apply similar investment techniques or methods of analysis as described herein. The views expressed here are those of the authors and not necessarily those of AQR.