Understanding Alternative Investments

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Alternative investments have not historically been included in a traditional stock-and-bond portfolio due to their complexity, fees, and structure.  However, the unique characteristics of alternative investments, including the asset classes and strategies they use, make them a dynamic complement to a traditionally diversified portfolio.  Including a diversified mix of alternative investments can smooth volatility and provide enhanced, risk-adjusted returns. 
 

Hypothetical Portfolio Models*

These models show the impact adding alternative investments can have on a traditional portfolio and the corresponding return for an investment of $100,000 over a 15-year period.

 

* Source: Morningstar Direct. 15-year time from December 31, 1995 to December 31, 2009. "Bonds" represented by the Barclays Capital US Aggregate Bond Index. "Stocks" represented by S&P 500 Index. "Cash" represented by 3-month Treasury Bill. "Alternative investments" represented by Dow Jones Credit Suisse Hedge Fund Index. You cannot make an investment directly in an index. Past performance is not a guarantee of future results.

¹ Risk is defined by standard deviation. Standard deviation is a statistical measurement that helps to gauge historical volatility and higher standard deviation indicates greater relative risk. Portfolio standard deviation is calculated through the weighted average of portfolio assets.

Based on an initial investment of $100,000 over a 15-year time period from December 31, 1995 to December 31, 2009.

This hypothetical model performance is not intended to represent a real investment. There is no assurance or guarantee that adding alternative investment strategies to a traditional portfolio will increase returns.

Transamerica Multi-Manager Alternative Strategies Portfolio seeks long-term capital appreciation and may be appropriate for investors who seek to maximize returns and who can tolerate substantial volatility in the value of their principal.

The Fund is subject to several principal investment risks, which depend mostly on the risks of the underlying funds as described below. The Fund's Prospectus contains complete and important details on the risks involved with investing in the Fund. Please read the Prospectus carefully before investing.

Global, foreign, and emerging market investing involves special considerations, including risks related to market and currency volatility, adverse social and political developments, and the relatively small size and lesser liquidity of these markets. The risks of investing in foreign securities are magnified in emerging markets.

Investments in small-sized companies present additional risks such as increased volatility, because their earnings are less predictable, their share price is more volatile, and their securities are less liquid than larger or more established companies.

Investments in high-yield bonds ("junk bonds") are subject to greater volatility and risks, because the income derived from these securities is not guaranteed and may be unpredictable.

Investments in real estate securities and real estate investment trusts ("REITs") involve special risks, such as the possible decline in value of real estate, extended vacancies, and uninsured damages from natural disasters.

Sector investing focuses on a specific industry and tends to concentrate investments in fewer securities. This may result in more volatility than the typical growth mutual fund, because while individual company stock risk is reduced through diversification, industry risk can be magnified.

Warrants and rights may be considered more speculative than other types of investments.

Hybrid instruments are potentially more volatile and may carry greater interest rate risks than traditional instruments.

Fixed income investing is subject to credit risk, inflation risk, and interest rate risk. Credit risk is the risk that the issuer of a bond won't meet their payments. Inflation risk is the risk that inflation could outpace a bond's interest income. Interest rate risk is the risk that fluctuations in interest rates will affect the price of a bond.

An investment in a money market fund is neither insured nor guaranteed by the FDIC or any government agency.

The fund's investment exposure to the commodities markets may subject the fund to greater volatility than investments in more traditional securities, such as stocks and bonds.

Both the principal value and investment returns of mutual funds will fluctuate over time so that an investor's shares, when redeemed, may be worth more or less than their original cost.

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