Natural capital as a shock absorber in investment portfolios

Historic volatility and uncertainty in global equity markets — driven by the escalating trade war and related inflation fears — is leading some investors to re–evaluate portfolio allocations to ensure they are well–positioned to weather the current economic environment. Of primary importance are allocations that can serve as a shock absorber within an investment portfolio, mitigating overall portfolio risk and reducing the impact of market volatility.

Although optimal portfolio allocation by asset class will vary by investor, there is a common desire for portfolio diversification, stability, and downside risk management. We analyze historical performance data across a range of alternatives and traditional asset classes to evaluate how natural capital may serve these three objectives focusing on periods of high volatility and significant drawdowns.