Understanding what defines liquid alternative investments, as well as the potential advantages and risks associated with these strategies, could prove critical when investing in this area of the market.
Market Analysis & Performance Summary
We believe investors considering alternative mutual funds, also known as liquid alternatives, face a quandary: the number of offerings has grown rapidly, but useful information about these strategies is lacking. Many investors are trying to assess liquid alternatives using traditional mutual fund evaluation methods, when we believe these investments do not fall neatly into traditional mutual fund strategy classifications.
In this publication, we suggest viewing liquid alternatives through the strategy lens of their privately-placed cousins, hedge funds, rather than through a traditional mutual fund strategy framework. By comparing what we call our “Liquid Alternative Peer Groups” to the relevant hedge fund indices, we believe investors can better assess how liquid alternative funds have performed. The MAPS is designed to help investors understand the risks and potential reward of liquid alternatives—which we believe helps enable them to make prudent investment decisions and appropriately manage investment expectations.