Fri, Sep 17, 2021
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Morningstar says Liquid Alternatives have yet to prove themselves

Friday, August 03, 2018

Matthias Knab, Opalesque:

In a new research paper from Morningstar published today, Jason Kephart and Maciej Kowara put alternative funds to the test. Though still relatively new, few alternative mutual funds have conferred meaningful diversification benefits in recent years, and the last five years have been one of the worst periods for alternative strategies since 1983.

According to their research, the plight of the alternative strategies is due primarily to two factors: stock and bond market returns, and rising correlations.

In the new research paper, "Liquid Alternatives Have Yet to Prove They Belong in Portfolios," the senior Morningstar analysts ran a test to evaluate whether liquid alternative funds would have improved the risk-adjusted returns of a well-diversified 60/40 portfolio of stocks and bonds. This framework for evaluating alternative funds builds upon the Morningstar Style Box for alternative funds, which makes it easier for investors to gauge a funds' diversification characteristics.

Until relatively recently it has been beneficial to add at least some hedge-fund exposure to the traditional allocation, as evidenced by the fact that the traditional portfolio's Sharpe ratio rose after adding an allocation to the HFRI Index. It's only in the past 10 years that the benefits of using hedge fund strategies have basically vanished.

Two factors went against hedge fund strategies in recent years

There are two factors that have gon......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. SPACs: The fall of the SPAC market has digital media companies in disagreement about best path forward, Cannae Holdings: SPAC bloodbath provides a good entry point, British car startup Cazoo raises $1bn from SPAC merger, Europe's incoming SPAC boom will create a demand for talent[more]

    The fall of the SPAC market has digital media companies in disagreement about best path forward From CNBC: The digital media industry has reached a strategic crossroads. Earlier this year, special purpose acquisition vehicles (SPACs) appeared to be the long-awaited savior of digital me

  2. Property: Real estate's new moneymaker is not design-driven, it's alternative, Two Sigma building quant tools to hunt real estate bargains[more]

    Real estate's new moneymaker is not design-driven, it's alternative From Forbes: There has been a recent shift of attention in the real estate market as to the types of investments which make the strongest returns. In the past, it's always been a combination of good design, prim

  3. PE/VC: Private equity GPs, LPs alike working on diversity and inclusion, Chinese regulator vows to crack down on private equity, venture capital funds, The VC playbook for portfolio companies: learning from the Covid-19 crisis[more]

    Private equity GPs, LPs alike working on diversity and inclusion From PIonline.com: Private equity general partners and limited partners are doing more to increase diversity in private markets, according to a report released Tuesday by the Institutional Limited Partners Association.

  4. PE/VC: Private equity continues to lead fund closings, Venture capital firms are fighting to throw money at cleantech[more]

    Private equity continues to lead fund closings From PIonline.com: Among private fund closings, private equity funds have led the pack starting in 2011, based on data collected by Pensions & Investments. During those years, private equity's share has ranged from 56% to 72% of the total

  5. PE/VC: Climate tech is hot, but VCs can't forget about water, Five top trusts to tap into the private equity boom[more]

    Climate tech is hot, but VCs can't forget about water From Crunch Base: "It is unequivocal that human influence has warmed the atmosphere, oceans, and land." These fiery words come from the latest landmark U.N. report detailing intensifying, universal climate change impacts. They cover