In my last post on this subject, I referenced a small selection of investments that employ “alternative investments” in their portfolio mix. Today, I’m going to describe a stand alone option. Technically, its a hedge fund, and as such, you are required to meet a personal financial threshold before you can buy into it. But even if you can’t meet the test, you should be aware of how a certain segment of the financial world makes money regardless of how the markets perform.
The challenge presented to any investor is to minimize risk while optimizing their investment return over time. AORDA® has developed a proprietary mathematical strategy that does just that. It is designed to reduce the risk of high losses. What you see is a conservative approach with outstanding results.

The following table reflects the actual trading performance of the three AORDA ® portfolios, gross of fees. The time frame shown is from January 3, 2005 through May 31, 2011. The reader should note the comparison with the return numbers for the S&P 500 less dividends. Remember 2008 when the financial crisis hit virtually all of us? How did your investments perform that year? Look at the 2008 numbers below.

The three Portfolios invest in only two US equity indices: the S&P500 and NASDAQ100. The process employed to achieve the numbers shown on the chart is automatic. No human hands are required. Every 24 hours during trading days, the entire portfolio is in cash at some point. Any investor can observe this via the internet by looking at their personal account. What makes this work are financial engineering models that take advantage of price movements across markets. The more volatility there is, the more opportunity for the process to return a positive number.

The mathematics behind the process are far beyond the scope of this short summary. The process grew from ideas published in 2000 in a paper called Optimization of Conditional Value-at-Risk. The authors were R. Tyrrell Rockafellar, Ph.D., Department of Applied Mathematics, University of Washington, and Stan Uryasev, Ph.D., Director of the Risk Management and Financial Engineering Lab at the University of Florida. The paper can be found at http://www.ise.ufl.edu/uryasev/CVaR1_JOR.pdf

The application of strategies like the ones described here demand a careful review before putting your money on the table. And while one should never make an investment decision based on past performance numbers, there is clearly something here that suggests some of your money should be allocated toward alternative investments. If you want more information, you have but to ask.