[Editor’s Note: This is the third of a four-part series.]
Part 3: Special Teams — Diversification
A New Way To Understand, Explain And Allocate
Alternative investments have moved from the sidelines to the mainstream of portfolio construction.
In 2025, the White House issued an Executive Order advocating for alts in the 401(k)s of 90 million American savers. In 2026, the Department of Labor proposed regulations to facilitate alts in target-date and allocation funds for these DC plans.
Unfortunately, the alts conversation has long focused on individual strategies in isolation: what each one does, not how they fit together.
The New Playbook for Alternative Investing offers a different approach: a practical framework built on the familiar language of football. Rather than treating alternatives as a separate sleeve, this framework positions them as integrated tools that can play complementary roles based on client goals and market conditions:
• Offense: growth
• Defense: income
• Special teams: diversification
• Complementary: integrated across the portfolio
This is Part 3 of a four-part series introducing the playbook.
In football, special teams don’t play every down, but when they take the field, they can change the game. Special teams can deliver results that augment offense and defense.
Here we examine uncorrelated strategies that can shift portfolio outcomes.
Special Teams Change The Game
In portfolios, special teams strategies are the diversifiers and tactical tools that may perform when traditional assets struggle. These are the uncorrelated return streams, the inflation hedges, the downside protection mechanisms, and the precision instruments that advisors deploy situationally to improve outcomes.
As allocators know, “in a crisis, all correlations go to one.” During 2008 and 2022, growth and income allocations fell simultaneously. Traditional diversification broke down. Special teams strategies are designed to perform differently in such environments.
Here’s how they work across four distinct categories of plays: punt, field goals and extra points, kick-off, and return.
Special teams, whether on the field or in the portfolio, occupy their own risk spectrum, making them a precision instrument for the coaching staff and allocators alike:
Punt: Reduce Risk With Structured Notes And Tail Hedges
The Play: The punt is about risk management. When the offense stalls, the punt flips field position and limits the opponent’s opportunity. It’s a defensive tool that protects against catastrophic outcomes.
Investment Role: Structured notes and tail risk hedges are designed to protect portfolios during significant drawdowns. They’re similar to insurance policies that may cost money in calm markets but deliver meaningful protection when volatility spikes or correlations break down.
Assets:
Structured Notes: Options-based strategies that provide downside buffers or caps on losses, often with some surrender of upside. Accessible via structured notes or defined outcome funds, these strategies are useful for clients who want to know their maximum risk and return or who want to make tactical tilts based on volatility.
Tail Risk Hedges: Strategies explicitly designed to profit from market dislocations or extreme volatility events. These may carry ongoing costs but can offset catastrophic equity losses.
Field Goal / Extra Point: Add Edge With Arbitrage And Niche Strategies
The Play: Field goals and extra points can boost the score when higher-reward plays aren’t worth the risk. They may not win the game alone, but they often make the difference in tight contests, such as a field goal or two-point conversion late in a close game to grab the win.
Investment Role: This group of specialized strategies may provide uncorrelated returns or distinctive risk/reward profiles. Approaches include arbitrage, such as merger and convertible arbitrage or relative value. Also included are niche alternatives: royalties, litigation finance, and insurance-linked securities. They’re not core holdings, but they can add meaningful diversification and incremental return when deployed thoughtfully.
Assets:
Arbitrage / Relative Value: These classic strategies aspire to capture spreads or valuation anomalies between securities, in pursuit of consistent, incremental returns while maintaining hedged or offsetting positions.
Niche Alternatives / Royalties: Esoteric strategies with uncorrelated return drivers that sit outside traditional investing: catastrophe bonds, music royalties, litigation finance, life settlements, etc. A feature of these strategies often includes present-valuing future return streams to “take the points.”
Kickoff: Shape The Start With Managed Futures And Global Macro
The Play: The kickoff sets field position and tone for the entire drive. A strong kickoff can pin the opponent deep, creating defensive advantage before the offense even touches the ball.
Investment Role: Managed futures and global macro strategies are designed to capture trends or changes across multiple asset classes: equities, bonds, commodities, and currencies. These strategies seek positive returns in both rising and falling markets. They can reshape the risk/return profile of an overall portfolio with a wide variety of uncorrelated return sources.
Assets:
Managed Futures / CTAs: Primarily systematic trend-following strategies that can profit in up or down markets by detecting and exploiting price momentum or other factors across global futures. These strategies have a documented history of “crisis alpha,” performing well during market dislocations when traditional assets struggle.
Global Macro: Discretionary or systematic strategies that take positions based on macroeconomic themes (interest rate shifts, currency movements, geopolitical developments), seeking returns uncorrelated to equity beta.
Return Team: Respond To The Unexpected With Real Assets
The Play: Return teams capitalize on sudden opportunities. When the opponent kicks, the return team is ready to respond, turning defense into offense in seconds to maximize field position.
Investment Role: Real assets (commodities, infrastructure, gold) often perform well during inflationary periods or market dislocations when traditional assets are under pressure. They provide tangible exposure that may appreciate when paper assets falter.
Assets:
Gold: The classic store of value with a long history as a sought-after inflation hedge and crisis asset.
Commodities: Long-only or long/short exposure to energy, metals, and agriculture. May provide inflation protection or capture gains from supply constraints, geopolitical shocks, or shifting trade dynamics.
When To Deploy Special Teams
In a 2008 scenario, offensive strategies and many defensive strategies (particularly those that are credit-related) get hit hard. Uncorrelated special teams strategies, such as managed futures with its history of “crisis alpha,” may provide protection. Allocating to these strategies before crisis hits can help create a resilient, diversified portfolio.
Special teams strategies are unlikely to dominate your allocation. Like their football counterparts, they’re situational tools deployed for specific objectives: establishing position, mitigating risk, taking points, or capitalizing on sudden opportunities.
But underweighting them is a mistake allocators should avoid.
Completing The Playbook
Special teams complete the playbook. Combined with offensive growth strategies (Part 1) and defensive income strategies (Part 2), advisors now have a framework for deploying alternatives across every market condition.
In Part 4, we’ll put it all together: the advisor as coach, deploying the team across an ever-changing field.
The static 60/40 allocation is yesterday’s game. You’re the coach now, with the full playbook at your disposal.
You’re the coach. The playbook is yours.
This article is adapted from The New Playbook for Alternative Investing, a practical framework for deploying alternatives across growth, income, and diversification. Discover and download the complete playbook from Welton Investment Partners:
Bill Marr is head of business growth at Welton Investment Partners, and Chris Keenan is principal and director of marketing at Welton Investment Partners.