Alternative assets performance in South Africa during pre and post COVID era

• Three risk adjusted measures namely Sharpe ratio, Treynor ratio and Jensen’s are used to examine the performance of the alternative assets. • It finds underperformance of REITs against stocks during COVID-19. • However, Gold continues to show robust performance during economic uncertainty. • By holding REITs and gold in the portfolio would have diversification benefits. The study investigates the performance of gold and Real Estate Investment Trusts (REITs) in comparison to traditional assets such as stocks and bonds. In the context of South Africa, with the focused being the COVID-19 pandemic era, it analyses the performance of the alternative assets against traditional assets, by using risk adjusted return measures namely Sharpe ratio, Treynor ratio and Jensen’s alpha. In addition to it the study utilizes wavelet analysis to determine the coherence periods of the different asset classes and possible diversification benefits. The results show that in South Africa, REITs underperform when compared to stocks on a risk adjusted basis and outperform bonds on a price return basis. We find that the underperformance of REITs against stocks is primarily due to the COVID-19 pandemic. On the other, it is observed that gold tends to underperform relative to stocks on a price return and risk adjusted basis, however, outperforms bonds on a price return basis. Gold continues to show robust performance in economic uncertainty which is significant for portfolio construction. The wavelet analysis highlighted the diversification benefits of holding REITs and gold in a portfolio with period of low coherence and out of phase movements.