Alternative Mutual Funds allocation, investing, personal, mutual, funds

scr879

Just curious to see if anyone has any Alternative type mutual funds they use for personal investing and what your thoughts are on using these in your individual asset allocation.

bodhisattva

On the fixed income side there are a handful of unconstrained bond funds worth looking at:
JSOAX, PUBAX, BASIX to name a few. Many of these funds have the ability to go zero or negative duration and invest in practically any segment of the fixed income market. Some are basically like fixed income hedge funds, without all of the leverage.

b_sea93

MERFX and PFATX are very good alternative strategies.
PFATX is Arnott's strategy that goes long the enhanced RAFI and short the S&P 500. He uses swaps and futures to get exposure to both and then invests the excess cash in PIMCO Total Return.
MERFX is a merger arbitrage fund that has been around since the 90's (I believe). Long track record, especially in the hedge fund format, and good returns in any market.

IAmNeil

I think the first step to look at these funds is whether the strategy is alternative beta or an alpha strategy?

If it's alternative beta (a commodities index fund for a simple example), can the mutual fund '40 act structure truly access the asset class? For instance, a lot of research is pointing to market neutral funds being more alternative beta than manager alpha, can a '40 act fund provide true exposure to that beta? In some strategies/asset classes the answer is yes, in some no.

On HF replication, there hasn't been any great emperical evidence that replication works. I personally believe that a lot of HF performance is alternative beta/segmented markets where a passive approach makes sense, but we're still not there on the product side.

If it's a alpha strategy, why is this manager working in a mutual fund environment? It's easy math, if he is successful, he'll make more money in the HF world.

This is an overly simplistic analysis, but I prefer most of my alternatives to truly be alternatives.

luckygiftvn

There are some interesting strategies currently in the marketplace. The problem is that a lot of these strategies, while not new to the HF world, are fairly new to the MF world so there isn't a lot of historical performance information. Most of the larger MF shops are beginning to the see the need to add alternative funds beyond the scope of real estate, commodities, natural resources, etc...

Three years ago there were only one or two absolute return MF strategies in the market. Now you can probably find two dozen. GS has a pretty interesting hedge fund beta replication fund that's available for retail purchase. GARTX