As part of an extended interview with AWP Soziale Sicherheit, Mark Dieringer, Head of Alternative Investments at Tellco, discussed the concrete impact of alternative investments – particularly in times of crisis – as well as how success is measured using the Sharpe Ratio.
In the picture: Mark Dieringer, Head of Alternative Investments at Tellco
During the COVID-19 downturn, the resilience of alternative investments became clearly evident. Dieringer emphasises that Private Equity holdings, in particular, recovered more quickly than traditional equities. Hedge funds and real assets also contributed to improving the Sharpe Ratio – that is, optimising the ratio of return to risk.
The Sharpe Ratio indicates how much additional return an investment generates for the risk taken. “A higher Sharpe Ratio generally signals a more attractive risk-adjusted return – in other words, the investment offers better returns for the risk incurred,” says Dieringer. It is especially useful for comparing different asset classes.
A concrete comparison:
These differences highlight that alternative investments can significantly improve the risk-adjusted return of a portfolio.
At Tellco, the Sharpe Ratio is not viewed in isolation, but rather as part of a broader analytical framework. “We analyse the reduction in volatility, the improvement in the Sharpe Ratio, and the drawdowns – that is, the difference between the highest and lowest price points,” explains Dieringer.
In addition, Tellco conducts stress tests in which portfolios with and without alternative investments are compared during periods of market stress – specifically in the years 2020 and 2022. The results are clear: alternative investments significantly reduce maximum losses.
A strategy is considered successful at Tellco if the Sharpe Ratio is at least 1.0 – ideally above 1.52.
Alternative investments make a measurable contribution to portfolio stability. Especially in times of crisis, private equity, infrastructure, and hedge funds prove to be valuable components in smoothing volatility and improving the Sharpe Ratio. Tellco applies a multi-dimensional assessment model to objectively evaluate the effectiveness of its investment strategies.