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Laxman Pai, Opalesque Asia:

Investment in the new, fast growing asset class of 'Alternative Risk Premia' (ARP) funds has delivered institutional investors better risk adjusted returns and more capital protection, said a new study.

According to the research by Cambridge Associates, ARPs are often added to a traditional portfolio (e.g. equities and bonds) to diversify returns and lower risk, which is particularly important now that traditional asset prices are seen as stretched.

Cambridge Associates' research, which covered $73bn of assets in 33 ARP funds, showed that low management fee costs have been an attraction of ARPs compared to conventional hedge funds, it said.

ARP funds are also popular as their relatively straightforward strategies mean fees typically range between 0.75% and 1%, it said. This can seem very competitive compared to the traditional '2 and 20' of the hedge fund industry.

ARP funds have delivered better returns and lower volatility than competing 'safe haven' asset classes.

Cambridge Associates said that its research shows a balanced portfolio with a 30% exposure to ARP funds would have returned 12% to investors between January 2007 and March 2009 (during the credit crunch), compared to just 3% for a traditional balanced portfolio of bonds and equities.

Their research also showed that a balanced portfolio diversified with ARP funds would have grown by 65% between September 2012 and December 2017 compared to an aver......................

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