Allium Financial Advisors of Lake Oswego, Ore., has appointed alternative assets specialist Scott Thompson to the position of chief investment officer (CIO), the company announced.
Thompson has 25 years of experience in alternative investments from his previous roles as a partner, portfolio manager and CIO at Common Sense Investment Management and Concentric Wealth Advisors. In his new role with Allium, Thompson will lead the firm’s investment committee as well as its investment research, portfolio management and client relations operations.
“Scott will elevate our depth of expertise and create an opportunity for our firm on the investment side of our business,” Allium CEO Sheree Demers Arntson said in a prepared statement. “He will also help us further refine our portfolio management process and make our portfolios even better.”
About one-third of Allium’s investments are in institutional-quality alternative investments, the firm says. The company said that Thompson would leverage his expertise in asset classes such as hedge funds, private equity, private debt and real estate to strengthen its existing investment resources.
“Using institutional-quality alternative investments for accredited non-profits is not done often because a lot of work must be put into finding the right opportunities for these organizations,” Thompson said in the news release. “But at Allium, we know that these investments present a great opportunity to potentially reduce risk by lowering volatility. They present a worthwhile opportunity for our clients to diversify and fortify their portfolios.”
In an email, Thompson said, “Alternative assets run the gamut from very safe to very risky. At Allium, we incorporate alternatives into client portfolios to first reduce overall portfolio volatility and, second, to enhance potential returns. We feel that the best [way] to compound our clients’ capital over time is to strive to never take a large loss and to grow [their wealth] responsibly.”
Thompson said that leverage was a common characteristic in alternatives that could increase investment risk.
“Some forms of leverage are prudent and advisable, such as a mortgage on your home, while other forms are not,” he said in the email. “Irresponsible use of leverage can be the quickest way to permanently lose capital. [But] some strategies, such as a beta-neutral arbitrage strategy, use a prudent amount of leverage to reduce risk of the overall portfolio.”
A market-neutral fund is a hedge fund that seeks a profit regardless of an upward or downward market environment, typically through the use of paired long and short positions or derivatives. These funds can potentially serve to mitigate market risk as they seek to generate positive returns in all market environments.
Another common hedge fund strategy, beta neutral portfolios, generate a profit without being exposed to market risk.