The role of alternative investments in Brazilian portfolios

Abstract

This paper assesses the impact of alternative assets on the performance of Brazilian asset portfolios. Although alternative assets are largely studied throughout the world, that is not the case for Brazil as there are just a few studies on the topic. As the Brazilian capital markets are growing at a fast pace, the high correlated aspect of the market calls for measures to ensure balanced returns for the long run, therefore, the insights of the study may support investors during the process of asset allocation. In this study the alternative assets were divided into two categories: Brazilian alternative assets and international alternative assets. Performance measures were obtained from a portfolio comparison and through a Markowitz frontier analysis. The results show that adding alternative assets (Brazilian or international) to a portfolio usually generates higher returns with lower risks, leading to better risk adjusted results and an overall more balanced portfolio.