This page looks at the correlations of public and private markets. Over the last ten years, the hunt for yield has taken investors into a wide array of different asset classes. The next ten years will likely be no different. While total return is important, investors need to remember that higher yield comes with higher risk, and that seemingly more attractive parts of the market like high yield and emerging market debt will not protect them in an equity market drawdown.
By contrast, alternative assets can enhance diversification in portfolios through non-correlated or negatively correlated returns. Real estate, real assets, and select hedge fund strategies can help to diversify a portfolio of stocks and bonds. Other areas of the private markets, like private equity, may have similar correlations to public equities, but provide opportunities for return enhancement.