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Inflation is surging, is your portfolio ready?

It is not easy for investors to improve their portfolio performance while managing risks. As US inflation risks rise, investors need tools to test (and possibly revise) the returns and risks of their allocations.

When aiming to enhance a portfolio, the common mantra is diversification. Reallocating a portion of a traditional portfolio to uncorrelated alternative investments can be powerful as firms aim to improve risk-return metrics under different scenarios.

Let’s see how a classic portfolio allocation can be evaluated, optimized, and tested when alternatives are properly considered in the mix. Here is a starting asset allocation portfolio:

Initial Portfolio Allocation


Between November 2016 and October 2021, this portfolio had an annualized return of 12.56% and a volatility of 10.07%. It had a max drawdown of -13.61%, reached in during the financial contraction caused by the COVID-19 outbreak in March 2020.

Using AlternativeSoft’s Asset Selection tool, we scanned a universe of 35,000 hedge funds to shortlist investments to include to the portfolio. Our criteria: AUM greater than $100m, negatively correlated to the portfolio bear returns, and positively correlated to the portfolio bull returns.


Using AlternativeSoft’s Optimization Engine, we can identify a better potential mix

AlternativeSoft Optimised Portfolio

The optimizer proposed allocating 25% of the portfolio to the three new hedge funds.

The cumulative outperformance of the proposed portfolio - with the AlternativeSoft optimization was 13.62%.


Now compare performance under a strong inflationary scenario. AlternativeSoft can simulate portfolio returns under various market conditions:

During a high inflationary shock scenario, the proposed portfolio outperforms the initial portfolio by a third. Using AlternativeSoft’s interface, firms can easily change assumptions or add new scenarios to see those impacts as well.

Inflation and economic uncertainty are the highest in decades, having the right investment software can differentiate skill from good fortune and help drive success. AlternativeSoft's platform helps firms evaluate, optimize and test portfolios under various scenarios while visualizing return and risk implications over time.

Click here to learn more on how Alternativesoft's software can help your firm find portfolio allocations which enhance portfolio returns and manager risk.

N.B. This article does not constitute any professional investment advice or recommendations to buy, sell, or hold any investments or investment products of any kind, and should be treated as more of an illustrative piece for educational purposes.

To trial a truly powerful and comprehensive analytic software for investment decisions, fund allocation, and our new, innovative digital due diligence visit , call us on +44 20 7510 2003, or email us

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