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"Alts" are a trick, a marketing ploy, a flim-flam.
Consider: most professional equity managers who oversee traditional (i.e. non-alt) long-only stock vehicles cannot consistently beat the S&P.
"Alt" managers engage in much more 'sophisticated" (i.e. complicated) strategies. The more complex any system, the greater the risk of effort, the less likely it is to succeed over long periods of time.
Consider "the Merger Fund" (MERFX) -- this "alt strategy" fund existed before the term "alt strategy". The strategy is among the least volatile in the alt universe.
But compare its trailing returns to VFSTX (Vanguard S/T invest-grade). VFSTX beats MERFX over trailing periods with greater predictability ---
Low-duration, investment-grade bonds -- these are the original "alternative" asset class to stocks. Boring? Sure. Stodgy? Conceded. But they deliver what, presumably, most investors are seeking from "alts" -- steady, predictable returns.
The Merger fund is not something I would routinely consider an "alt fund". It simple plays the vig on upcoming mergers, and does it extremely well for a low risk holding. You are comparing this to a short term bond fund. Not sure I see where that comparison fits.
Press, M* categorizes MERFX as a Market-Neutral fund. Market-neutral funds, in turn, are classified as an alt strategy.
The comparison was to evaluate the relative merit of using MERFX (and as a proxy for alt funds more generally) as a diversifier from stocks, vs. using a simpler, less complex option -- s/t bonds.
To repeat what I said last week, lumping alt funds into one group is like saying mutual funds are all the same. There are obviously different alt funds. Income funds did well during the down spike or at least mine did. I did check others though for comparison.
Comments
Consider: most professional equity managers who oversee traditional (i.e. non-alt) long-only stock vehicles cannot consistently beat the S&P.
"Alt" managers engage in much more 'sophisticated" (i.e. complicated) strategies. The more complex any system, the greater the risk of effort, the less likely it is to succeed over long periods of time.
Consider "the Merger Fund" (MERFX) -- this "alt strategy" fund existed before the term "alt strategy". The strategy is among the least volatile in the alt universe.
But compare its trailing returns to VFSTX (Vanguard S/T invest-grade). VFSTX beats MERFX over trailing periods with greater predictability ---
Low-duration, investment-grade bonds -- these are the original "alternative" asset class to stocks. Boring? Sure. Stodgy? Conceded. But they deliver what, presumably, most investors are seeking from "alts" -- steady, predictable returns.
The Merger fund is not something I would routinely consider an "alt fund". It simple plays the vig on upcoming mergers, and does it extremely well for a low risk holding. You are comparing this to a short term bond fund. Not sure I see where that comparison fits.
The comparison was to evaluate the relative merit of using MERFX (and as a proxy for alt funds more generally) as a diversifier from stocks, vs. using a simpler, less complex option -- s/t bonds.
To repeat what I said last week, lumping alt funds into one group is like saying mutual funds are all the same. There are obviously different alt funds. Income funds did well during the down spike or at least mine did. I did check others though for comparison.
Poor journalism déjà vu
Oh yes, I forgot - their high fees are an alternative to lower cost plain vanilla funds.
Thank you for your understanding in this matter.
Office of the Chief Cynic
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