Tags: alternative | mutual | funds | market

WSJ: Alternative Mutual Funds Popular But Have Underperformed

By    |   Wednesday, 04 June 2014 08:57 AM

Alternative mutual funds have attracted a great deal of money since the financial crisis of 2008, as investors seek to protect themselves against a plunge in stocks.

But the funds' performance has lagged that of stocks, The Wall Street Journal reports. Alternative funds, as defined by research firm Morningstar, include those that short stocks, but exclude those primarily invested in gold and real estate.

The funds use different investment strategies in order to limit risk while producing decent returns and typically do not closely correlate with the broader stock market.

Editor’s Note:
5 Shocking Reasons the Dow Will Hit 60,000

If the alternative funds act as advertised, "you're protected on the downside, but you're really going to pay a price if the market is raging," Adam Zoll, a Morningstar analyst, tells The Journal.

Since 2008, alternative mutual funds have increased their assets faster than any other fund category as defined by Morningstar, the paper reports.

The funds numbered 442 at the end of April with $150.1 billion of assets, up from 215 funds with $36.4 billion of assets at the end of 2008.

But while the S&P 500 returned 5 percent in the first five months of the year, alternative funds' returns ranged from an average of 1.6 percent for long/short stock funds to an average of negative 1.5 percent for managed-futures funds, according to Morningstar.

"These funds were designed for a flat to down market, and we haven't had a flat to down market in so long that if you compare them to long-only equity funds, they're going to show significant underperformance," says Todd Rosenbluth, a fund analyst at S&P Capital IQ.

"But that hasn't stopped fund companies from launching them and investors from putting money in for fear that the market's going to pull back sharply."

Bankrate.com lists five alternative asset classes in which you might consider investing:
  • Peer-to-peer loans
  • Art and rarities, such as wine
  • Impact (socially responsible) investing
  • Closed-end mutual funds, which trade on stock exchanges
  • Private offerings to invest in companies.

In any of these areas, of course, do your homework thoroughly before committing any money.

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

© 2021 Newsmax Finance. All rights reserved.


StreetTalk
Alternative mutual funds have attracted a great deal of money since the financial crisis of 2008, as investors seek to protect themselves against a plunge in stocks.
alternative, mutual, funds, market
361
2014-57-04
Wednesday, 04 June 2014 08:57 AM
Newsmax Media, Inc.
 
Newsmax TV Live
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved