So far in 2016, investors looking for capital preservation, income or predictable returns have contended with substantial risks of inflation and rising interest rates.

There’s always another way.

Strategists with Atlanta-based Invesco believe that alternative investments can hedge against inflation and interest rate fluctuations while still delivering returns consistent with client goals.

“One of the things we always show advisors and clients is the historical performance of alternatives,” says Walter Davis, an Invesco alternative investment strategist. “They tend to perform with equity-like returns but lower levels of volatility and downside. If you look, alts have historically lagged equities in periods of strong performance, and outperformed in weak periods of equity performance.”

Davis believes that beta-neutral, global macro and equity long-short strategies can accomplish the same ends as traditional fixed-income and equity products without exposing investors to the same level of volatility.

Jason Bloom, Invesco Powershares’s director of alternative and commodity research, says that the time is right for commodities to offer a better hedge against inflation risk than Treasury Inflation-Protected Securities, or TIPS.

“Commodity prices are a significant part of inflation,” Bloom says. “For TIPS, the [consumer price index] is part of their return calculation, but they’re highly sensitive to the interest rate environment, too. The bond-like properties of TIPS can overwhelm the inflation hedge-like characteristics.”

Market-neutral money market mutual funds offer investors access to capital protection with reduced risk, Davis says.

Invesco offers two primary market-neutral options for investors. One is the traditional, low-yield money market mutual fund. The other, Invesco’s All Cap Market Neutral Fund, offers potentially double-digit annual returns, says Davis, but also carries twice the volatility of bonds.

“Actively managed money market funds bring something totally different to the table,” Davis says. “If an investor goes to cash, they’re basically getting zero or worse. If you look at our more aggressive market mutual fund, we can give you negative correlation to stocks. We can give you half the volatility, but still generate returns of high single digits to low double digits with principal protection. It’s the best of all worlds.”

Global macro strategies and managed futures work well in periods of volatility and interest rate uncertainty because managers can access a broad range of investment products in the regions and countries presenting the best opportunities, Davis says.

In a similar vein, long-short equity strategies also have the benefit of active management—so they can find opportunities in difficult markets, says Davis. That makes them an ideal replacement for traditional long-only equity strategies during particularly uncertain or volatile times.

“We focus on two things,” says Davis. “Our funds have a consistent net-line exposure to the market so that they capture meaningful beta. Then we look for managers that are good on the short side and can add value regardless of the market environment. They’re not just shorting an index; they’re shorting stocks they think they can make money on. If you have good managers, they should be able to outperform equity markets on the long and the short sides.”

Capital preservation and potentially strong returns can also be found from commodity investing, says Bloom, but the timing has to be right.

Since the dollar was decoupled from gold in the 1970s, commodity prices have run in seven-year cycles, says Bloom—a cycle that Invesco believes bottomed out sometime in the past four months.

“Through last year into the first part of this year, we had performance of what appears to be normal cyclical weakness,” says Bloom. “The price war that OPEC instigated at the end of 2014 coincided with the run-up of the dollar resulting from divergent interest rate policies over the same time frame. It was a perfect storm to create downside on commodities.”

That downturn appears to have reversed this year, says Bloom, not just because commodities have reached another cyclical upside. “We’ve seen the dollar reverse. We’ve seen cyclical supply and demand forces turn more positive. It’s almost a perfect storm in the other direction, but it’s not a storm that will drive prices as high as fast as the downside. It’s likely to be less volatile on the way back up.”

That doesn’t mean commodities are prepared to run across the board. Bloom notes that metals and energy suffer from oversupply that won’t be quickly overcome.

“Sentiment really drives where the floor in prices is, and production tends to set the ceiling,” Bloom says. “I think we’re in an uptrend and that commodity prices are going to remain high. The nice thing is that we’re going to get plenty of reasonable entry points if we buy the dips, because we’ll continue to see some of these gyrations. Regardless of all these other influences, you still have a broad cyclical dynamic going on and things seem to be playing out exactly as we might expect. Maybe our expectations for how far energy can go should be tempered, but the outlook otherwise doesn’t change much.”

According to Bloom, commodities historically provide better inflation protection, even as TIPS have become more expensive as investors seek shelter.

TIPS tend to underperform in a rising rate environment, says Bloom, because their value drops, while commodity prices are relatively unaffected by interest rates.

“Going forwards, there’s a lot of risk we haven’t seen play out yet in extremely low-yielding fixed income,” Bloom says. “The rate environment has not reversed much. You can still wipe out a whole year’s worth of returns pretty fast in long-term bonds with a small uptick in interest rates.”

Commodities also provide better protection for global investors because they aren’t subject to fluctuations due to currency movements, says Bloom.

By failing to hedge fixed-income investments, advisors and investors can diminish or cancel out inflation protection, Bloom says.

“Currency movements are a risk to all asset classes, but especially fixed income,” Bloom says. “It’s only in the face of a massive currency move that you ever see commodity returns wiped out completely. In this low-yield environment, foreign securities yield 4 to 5 percent. If you get a 5 percent move in the currency, they’re gone for a while.”

As an added bonus, commodities bought at or near the bottom of the cycle also provide enhanced returns when held, Bloom says.

Bloom argues that it is better to invest in commodities, or commodity-tracking funds, rather than in related equities like gold miners or pipeline MLPs.

“There’s going to be more volatility in gold miners and other related equities than there is in the underlying commodities,” Bloom says. “If I’m long something like gold, I know what the likely outcome is going to be, but I’m not sure about the gold miners. I’ve heard from two major banks and even Moody’s that the valuations in energy equities are expecting a $65 barrel price of crude oil, and that might be overly optimistic. I have concerns about energy equities over the long term.”

With commodities and other alternative strategies, timing is important, says Davis.

“I’ve seen time and again that clients and advisors come into the asset class after it’s had its run and after it would have added value in the portfolio,” Davis says. “We’re encouraging people to be proactive in anticipation of the normalization of volatility.”