Intro
Alternative investment strategist Brendan Sims walks through how Fidelity's liquid alternative shelf is built, how advisors are carving alts out of both their stock and bond allocations, and what a market neutral, a long short and an alternative bond fund each contribute inside a one-ticket multi-alt product. He also gives his read on AI capital spending, index concentration and leverage, and takes listener questions on portfolio ratios and short opportunities.
Guest: Brendan Sims, alternative investment strategist, Fidelity Investments Canada
Host: Pamela Ritchie
Published: 28 August 2026 on FidelityConnects
Episode page | 30 min
Key Takeaways
A 70/30 multi-alt is nothing like a 70/30 portfolio
"So, we can infer maybe like a 25 to 27% net exposure to fixed income" — Sims, on the balanced product's actual bond footprint
The whole fund runs "something to the tune of 60 to 70% net exposed" across all instruments
Advisors are cutting their interest rate sensitivity roughly in half
Passive bond indices run five to six and a half years of it; the comfort range Sims hears is "1 and 1/2 to 3 and 1/2"
The long short framework changed what a manager can do with a name they dislike
Before it, "the best you can do when you don't like a name is not own it"
Earnings drive everything, and capital spending drives earnings
"we're spending just shy of a trillion dollars this year collectively across a number of sort of large mega cap companies"
Market neutral earns a money market rate on its short proceeds before any stock picking
The book runs 100% long against 100% short, with "60, 80 different pairs" at any one time
Concentration risk is now a geography question, not just a sector one
In South Korea, "two or three companies make up almost a 40% of the index"
Leverage is the risk he keeps coming back to: borrowing, shorting and derivatives together, "at unprecedented levels"
Fidelity's alt lineup carries no performance fees, and Sims thinks fee transparency is moving money
The Canadian liquid alt market has tripled in three years, and the multi-alt slice of it is still under 10 billion
Private real estate is a buyer's market for anyone who is not being forced to sell
"We have dry powder at a time where many are looking to offload buildings to fulfill redemption requests"
What Alternatives Are For, and Who Is Buying Them
Ritchie opened on the problem alts are meant to solve: the search for diversification is intensifying, alternatives are taking a bigger role alongside stocks and bonds, and advisors are rethinking portfolio construction around what she called the evolving 60/20/20 framework
Sims frames alts as building blocks chosen for behaving differently at different times, with the allocation driven by the plan rather than the product: risk budget, upcoming purchases, and what the invested dollars are actually for
A young investor holds more risk assets than an older one, all else equal — and the buyer for alts in Canada is the investor who has already accumulated meaningful capital and sits further up in age
The last decade or more has been rewarding enough that the question has changed from growing capital to preserving it — Sims describes trading away some of the growth mandate for a degree of preservation
The planning-level questions that drive the asset allocation, in his words: do we want to spend and draw down, or preserve, grow and maintain for legacy purposes
What the Long Short Framework Changed
Ritchie put regulation forward as one catalyst, dating the rule change to five or six years ago; Sims agreed and said it let Fidelity take what it was already doing in research and extend it
The limitation that alternatives removed: "the best you can do when you don't like a name is not own it prior to the availability of the long short framework"
Being able to play both sides of the trade introduces a differentiated source of return and, in his formulation, "A for alpha and B for ballast"
Ritchie liked the line enough to tell him he would be using it again
The Shelf: Three Funds in October 2020, More Than 10 Today
"We started with three in October of 2020" — and the lineup now runs to "over 10 different liquid alternative mandates" plus a private real estate vehicle
Sims describes the shelf as a road map: an advisor arriving with a geography, a style and a risk level should find an underlying long short product that fits
Above those sit the multi-strategy products, built out of the same underlying funds, for advisors who want a single lower-risk-rated holding that rebalances itself
He is careful not to let the multi-strategy funds be mistaken for something drastically different — the comparison he reaches for is an all-encompassing, self-rebalancing suite of differentiated building blocks
Inside the Multi-Alt Products
Two exist today, multi-alt equity and multi-alt balanced, and both are geographically diverse — roughly a third each to Canada, the US and the rest of the world
The mix deliberately pairs higher net, market-exposed mandates with defensive, lower net, less correlated ones, so different pieces work at different points in a cycle
Sims uses seasons rather than months: "there's going to be products that are going to do better in the winter months versus the summer months"
His read on where we are: it has been summer, with markets running at or around all-time highs across several developed geographies and indices
The Alternative Bond Fund
Fidelity stood up the Fidelity Alternative Bond Fund earlier this year, applying the long short structure to fixed income and credit instead of equities — "we're not holding equity securities. We're trading bonds"
Benchmarked to a corporate bond index, with "a component to this product that's up to 25% high yield"; Sims puts the current level around 15%, with flexibility to move toward or away from it as the PMs see fit
The product can use derivatives a traditional 81-102 mutual fund cannot, which is how it manages its interest rate sensitivity
It is running a few years under the benchmark on that measure without being forced into short-dated bonds only: "you can own across the curve and you can manage your duration accordingly"
On the year so far: "the backdrop for fixed income unit holders has been bleak" — Sims says the market has gone from the prospect of a quarter point cut to the possibility of a quarter point hike, changing day by day if not week by week
That fund is "about a third of the fund" inside multi-alt balanced, and the piece that gives the balanced product its lower volatility profile against its equity sibling
How Advisors Fund the Alt Sleeve
Sims hears the word sleeve constantly — a carved-out portion of the portfolio with a job, and a piece of mental accounting that helps advisors think about it: "we're looking for a portion of our overall model or client account to do differently"
The money comes out of both stocks and bonds, not one or the other
On the framework Ritchie raised at the top: "And I know we talk about the 60/20/20 if you would. That's just a boilerplate." It is rarely observed exactly, and it looks different for every advisor
The question he walks advisors through — one of these happened the day before the interview — is what the new sleeve is for: enhancing return, or bringing overall risk down
The misconception he runs into: "if you're shorting, if you're using derivatives, these are all big scary words", with movies and books to match, and an assumption that risk must be higher
His answer is that "these are tools that are responsibly used, they can actually be used to bring down portfolio volatility", and that de-risking is the more common motive
Ritchie's read, which Sims accepted: traditionally the 40 in a 60/40 was doing the risk reduction, and alts are being used on that side
Why the Rethink Is Happening on the Bond Side
The larger camp Sims hears from believes the multi-decade downtrend in interest rates is over, and that what replaces it is anyone's guess
The working assumption is a more range-bound, volatile or higher rate regime "for at least the foreseeable quarters and/or year ahead" — though he flags it as other people's view, not his call: "I'm not calling it, but that's what I would say seems to be more broadly adopted by the masses"
The problem with a static passive core, in his telling, is the index construction itself: "they have the greatest capitalization towards the most indebted companies"
He calls that backwards and counterintuitive, then sets it aside as a topic for another conversation
Passive bond indices carry five, six or six and a half years of interest rate sensitivity, against what advisors now say they want: "We're often seeing advisors targeting something more like 1 and 1/2 to 3 and 1/2 as their comfort range"
Total Cost Reporting and a Fast-Growing Canadian Alt Market
Ritchie raised total cost reporting, new this year, as another catalyst — advisors and clients being able to see exactly where the fees come from
Sims noted the period of record is underway now, with the reporting itself landing in the new year, and called it one of several forces driving reallocation from one product to another, and new dollars toward one rather than another
The Canadian alt space has tripled in size in the last three years, on his account
The growth is not only reallocation out of long-only mandates: it is also money that was never invested in the existing solutions, arriving as businesses and rental apartment buildings are sold and generational wealth gets deployed into long-term allocations
He is careful to spread the credit — Fidelity is participating in that growth, but so is the rest of the Canadian alt landscape
The Long Short Lineup by Geography and Manager
The long short solutions now span the global spectrum, including a predominantly ex-North America fund run by two PMs Sims names as Nick and Max
The case for going overseas is market efficiency: he describes it as a less efficient environment for security selection than the more heavily covered North American landscape
Dan Dupont runs the global value long short fund; David Way runs the more North American product
Ritu Kumar covers Canada with a 130/30 vehicle — 130 long, 30 short, driven by security selection in the Canadian market
These are the building blocks that made the multi-alt solutions possible
Market Neutral, and the Pairs Book Behind It
The market neutral fund runs 100% long against 100% short, leaving the portfolio effectively net zero or close to it
Part of the return arrives before any stock picking, as a carry on the cash proceeds from the short book: "So there's this embedded money market type rate of return on a market neutral product"
The rest comes from the differential between the long holdings and the short ones, expressed as "60, 80 different pairs of long short investing strategies on themes" at any given time
Sector lines do not map onto the pairs cleanly: "there's 11 GICS sectors, and they very imperfectly divide the world of companies" into eleven tranches
His example is Meta sitting in communications while the peers you would naturally compare it against sit in information technology
What actually binds a pair is a shared exposure, not a shared sector label — two airlines are in the same industry, but the point is that "they're paying the same fee for jet fuel", a price that moves for both of them, and that they may be under the same union
One Word for What Is Driving Markets: Earnings
Asked what is top of mind for investors amid trade noise and volatility, Sims gave one word: "One word it would be earnings. Earnings are driving everything."
What drives earnings is capital spending, and the spending is AI: "It is likely what has pushed markets to melt higher", and in his reading what pulled markets out of the October 2022 low into the multi-year phase since
Getting there likely involves trillions and trillions of dollars, and the spending is already running: "we're spending just shy of a trillion dollars this year collectively across a number of sort of large mega cap companies"
"if they stopped overnight, like that would be a painful pill to swallow" — he does not think that happens, but says the direction and rate of change of the spend is what matters
The question he poses is whether capex expands because the payoff is getting closer and earnings or revenue growth actually shows up, or gets curtailed by companies protecting cash flow and shareholder returns
Ritchie's own observation: there is now evidence in earnings and company discussion that deployed money is becoming accretive, in certain business lines rather than everywhere, and that it seems to be starting
The AI Stack, From Flattened Land to the End User
Sims lays the stack out top to bottom: applications and end users, then the language models themselves, then infrastructure, then chips, then energy — and then, at the very bottom, materials pulled out of the ground
"The copper that's used, the data centers, the racking, the rebar, the concrete that's poured, the land that's flattened" — a long chain of steps involved in spending trillions on something nobody was spending on before
Ritchie's aside: "Starting with the land being flattened, that's the harshest one"
The names he reaches for at that end of the chain are Caterpillar and electrical utility component providers — participants who come long before the chip maker at the silicon level
Fidelity PMs across the alt lineup and the wider firm are invested in the chip makers and in the companies those chip makers buy equipment from
At the other end sit the businesses AI streamlines, which is where he thinks the unpriced earnings expansion is: "what company presently employs 10,000 people isn't going to necessarily lose any, but maybe in five years they're going to be double the revenue base with still 10,000 people"
The Risks Underneath the All-Time Highs
Sims lists three: "There's risk around the circular reference of payments around AI", risk around debt levels, and risk around concentration in investable indices
On emerging markets, he says "it's said that some 30% of an index is concentrated only a small handful of three or four names"
Ritchie pushed the conversation toward leveraged ETFs and what she called financial engineering risk
Sims widened it to leverage in every form, at unprecedented levels — borrowing money, selling short, and leverage through derivatives: "There's a lot of leverage out there."
His summary of the position: a lot of unknowns causing risk for markets that are sitting at or around all-time highs
Listener Question: What the 70/30 Really Nets
A listener asked for the long short ratio between equities and bonds inside multi-alt balanced
About 70% of the fund goes to a combination of market neutral and long short funds, and 30% to the alternative bond fund — "So, what you're doing is you're picking up a 70/30 of sorts"
The crucial caveat is that only a portion of that 70 is net exposed to equity markets, because none of the underlying funds is 100% long — "So, it's not like you're 30% bonds, 70% equities"
The whole product runs "something to the tune of 60 to 70% net exposed" across all instruments
Working the bond side through: the bond fund is somewhere around 90% net on a footprint of 30, so "we can infer maybe like a 25 to 27% net exposure to fixed income"
Listener Question: Where the Short Opportunities Are
Asked which geographies offer the best short opportunities, Sims declined outright, saying he was not equipped on the call to answer where the highest conviction shorts sit, and repeating that he did not want to be read as calling any region attractive
What he offered instead was composition: South Korea is an index where "two or three companies make up almost a 40% of the index", and some of those names are down in a big way since late June
The wider point: "geographies are playing more of a diversifying role than they once did" even a few years ago
The dividing line he draws is not just growth against value but AI against not-AI — South Korea and Taiwan carry high concentrations of it, while Canada is energy and banks and does not carry the same exposure
Working With the PMs, and Hiring an Alt Strategies Team
Sims describes his job as answering as many of the questions that would naturally go to a portfolio manager as he can
Standing monthly meetings with the PMs review trade activity — what a position was there for in the first place, whether the thesis was long or short term, whether it has unwound, and what changed in sentiment
Not every trade needs a conversation: sometimes the world changed and the position was closed
The other half of the role is being a megaphone for the wider alt lineup, and Fidelity is staffing up for it — "we're in the process of building out our alt strategies team across the country"
The reason is scale: a small lineup with less engagement has become a bigger lineup with more engagement, and more demand for updates across the 10-plus funds
The Real Estate Trust and the Brookfield Partnership
Ritchie raised the real estate alt and asked whether the public portion was 30%
"up to 30% of Fidelity Alternative Real Estate Trust is going to be in publicly traded REITs", managed by Don Newman
"The 70% or more is actually going to be allocated to private Canadian real estate and that's managed by Brookfield on our behalf"
Sims is unreserved about the partner: "we are extremely impressed with the pedigree and the service and the delivery that they've brought forward since our partnership was stood up over 3 years ago"
The properties span industrial logistics, multi-family, old age living, and student housing across Canada
The market backdrop is the opportunity: liquidity has been a constraint for some funds, and "We have dry powder at a time where many are looking to offload buildings to fulfill redemption requests"
His posture on buying into that: "there's only good times and great times to be buying great assets", and then being patient enough to let them come to you
Where One-Ticket Alt Solutions Go From Here
The multi-alt category is "less than 10 billion in size" and, by his estimate, "less than 10% of the broader liquid alt space"
Sims expects it to become far bigger: "I see that playing a more meaningful like a third of the liquid alt landscape" as more providers bring these solutions to Canadian investors
His evidence is Fidelity's own ETF and mutual fund lineups, where one-ticket solutions have already taken the flows, and he cannot see why the alt lineup would behave differently
With KYP, KYC and the other flags advisors deal with, "a one ticket self-rebalancing, no performance fee solution is highly attractive"
On fees specifically: "there's no performance fees across our liquid alternative lineup"
What he thinks is moving the money: "value for fees is crucial in today's landscape" — and it is bringing advisors to the door for a meeting across the product range
Sims' bottom line is that alternatives have stopped being a specialty holding and become a construction choice: the shorting, the derivatives and the pairs are there to cut correlation and volatility, and the money is arriving because a one-ticket, self-rebalancing, no-performance-fee version of that finally exists.
Products, Companies & Tools Mentioned
Fidelity multi-alt equity and multi-alt balanced (The two multi-strategy products, roughly a third each Canada, US and rest of world; the balanced one runs about 70% market neutral and long short funds against 30% alternative bond)
Fidelity Alternative Bond Fund (Stood up earlier this year; long and short books in bonds and credit, up to 25% high yield and currently nearer 15%, running a few years under its benchmark on interest rate sensitivity)
Fidelity's market neutral fund (100% long against 100% short, netting close to zero, earning a money market type return on short proceeds plus the spread on 60 to 80 thematic pairs)
Fidelity's long short funds (The global ex-North America fund run by Nick and Max, Dan Dupont's global value fund, David Way's North American fund, and Ritu Kumar's Canadian 130/30)
Fidelity Alternative Real Estate Trust (Up to 30% publicly traded REITs under Don Newman, the remainder private Canadian property — industrial logistics, multi-family, old age living and student housing)
Brookfield (Manages the private Canadian real estate side of the trust; Sims calls the pedigree, service and delivery over three-plus years extremely impressive)
Caterpillar and electrical utility component providers (His examples of AI-chain participants who get paid long before the silicon layer)
Meta (Sits in communications while its natural comparables sit in information technology — his illustration of why GICS sectors divide the world imperfectly)
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