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Barron's - Alternative Investments: Surfing the Market
"The mutual fund industry has embraced its version of alternative investing, putting hedge-fund-like strategies into more than 700 mutual and exchange-traded funds that aim to provide the same risk/return profile with lower fees, more transparency, and daily liquidity."
To read the article, click on the top link in this Search
Thanks for posting this davfor. In the search for a replacement for bond funds for stability, I researched income funds and in particular multi asset income funds. In addition, AC introduced a new alt fund, Alternatives Income Fund which sounds like the BlackRock fund in the article. I have found this fund so far to be very stable which I was looking for. I had previously read a paper by Ms. Chang in which she had recommended these funds as a stabilizer in a portfolio, something that bond funds used to do.
@JohnChisum You are welcome. M* pigeon holes ALNNX as a multialternative fund. The article highlighted MASNX which M* also categorizes as a multialternative fund. I have owned MASNX since shortly after it became available in 2011. The only thing that has frustrated me about it has been the 1.74% expense ratio. But, I guess having all those managers costs money. Its return has averaged 4% per year over the past 3 years. I have held MASNX in the "ballast pot" portion of my portfolio.
@davfor The expenses you pay as a shareholder in MASNX are actually higher than that. The e.r. of 1.74% does not include (1) dividend expense on short sales and (2) interest & borrowing costs on leverage line of credit carried by MASNX, should any/all of the subadvisors decide there is a reason to use it (right now, as far as I can tell, DoubleLine is the only advisor who is). When these costs are included, the fund's total expense (to shareholders) is 1.99%. http://www.mastersfunds.com/alt?qt-tab_block_for_alt_fund=2#qt-tab_block_for_alt_fund
Two funds that come up on my radar in the multi-alternative space are PONDX and LSIZX.
PONDX (multi-sector bond fund) seems to goose performance with derivatives and is a strategy that charges ER of .79. LSIZX (nontraditional bond fund), though presently closed to new investors, combines mostly limited duration low quality bonds and charges again an ER of .79. Columbia Strategic Income has been around in one form or another since 1977.
To me, a fund manager is being paid (ER) to not only identify the types of multi-alternative investments that are the best performing, but to blend them in a manner that maximizes total return while attempting to minimize risk.
I like fund manager to have a wide mandate when it comes to these types of investment choices.
Recent Article on why not to buy into the hype of alternatives:
" A combination of cash instruments like money markets and CDs along with a high-quality, short-term bond fund and a similar quality intermediate fund will do the trick."
"I like fund manager to have a wide mandate when it comes to these types of investment choices."
I agree. With these types of investments or even bond funds, I like the strategy, especially when you depend on these funds for ballast or relative safety in a portfolio.
@Bitzer Yes, it certainly matters where they go and when they go there. And just to demonstrate how much difference there is between "non-traditional" bond funds, here's something I ran across several days ago, a rather cursory yet quantitative breakdown of the top 5 funds (with respect to total return) vs. the bottom 5 funds, from Aug 2013 thru Aug 2015:
I have complained in the past about MASFX/MASNX (1.49% / 1.74% net ER).
*** (below from Litman/Gregory):
MASFX / MASNX
Inception Date 9/30/2011 9/30/2011 As Of Date (1) 4/30/2015 4/30/2015 1.49 / 1.74
Total Operating Expenses (%)
1.74 / 1.99
(1) - Does not include dividend expense on short sales of 0.20% and Interest, Commitment Fees and other Borrowing Costs of 0.05%.
*** Relatively speaking, MASFX/MASNX has delivered on low volatility (4-8%) on its risk management goals, but as a shareholder, I cannot fathom how it maintains the fund has a "highly competitive" cost structure. That is indeed, frustrating.
It's certainly not competitive for a comparable 40/60 stock/bond mix.
To my eyes, Litman Gregory Alternative Strategies should be renamed Alternative Balanced Fund.
Comments
The fund I refer to is ALNNX.
John.
http://www.mastersfunds.com/alt?qt-tab_block_for_alt_fund=2#qt-tab_block_for_alt_fund
PONDX (multi-sector bond fund) seems to goose performance with derivatives and is a strategy that charges ER of .79. LSIZX (nontraditional bond fund), though presently closed to new investors, combines mostly limited duration low quality bonds and charges again an ER of .79. Columbia Strategic Income has been around in one form or another since 1977.
To me, a fund manager is being paid (ER) to not only identify the types of multi-alternative investments that are the best performing, but to blend them in a manner that maximizes total return while attempting to minimize risk.
I like fund manager to have a wide mandate when it comes to these types of investment choices.
" A combination of cash instruments like money markets and CDs along with a high-quality, short-term bond fund and a similar quality intermediate fund will do the trick."
alternative-to-what, making-money?
I agree. With these types of investments or even bond funds, I like the strategy, especially when you depend on these funds for ballast or relative safety in a portfolio.
It comes from
http://markovprocesses.com/blog/2015/08/examining-recent-winners-and-losers-in-the-nontraditional-bond-fund-category/
where you'll find more food for thought.
I have complained in the past about MASFX/MASNX (1.49% / 1.74% net ER).
***
(below from Litman/Gregory):
MASFX / MASNX
Inception Date 9/30/2011 9/30/2011
As Of Date (1) 4/30/2015 4/30/2015
1.49 / 1.74
Total Operating Expenses (%)
1.74 / 1.99
(1) - Does not include dividend expense on short sales of 0.20% and Interest, Commitment Fees and other Borrowing Costs of 0.05%.
***
Relatively speaking, MASFX/MASNX has delivered on low volatility (4-8%) on its risk management goals, but as a shareholder, I cannot fathom how it maintains the fund has a "highly competitive" cost structure. That is indeed, frustrating.
It's certainly not competitive for a comparable 40/60 stock/bond mix.
To my eyes, Litman Gregory Alternative Strategies should be renamed Alternative Balanced Fund.