Expert Analysis and Commentary
The Outlook for Liquid Alternatives in 2015
Justin Frankel Jan 14, 2015
New Launches for 2015
Investing in hedge funds involves a lot of due diligence, and smaller investors and the advisors with whom they work are often not prepared to conduct the thorough examination of managers and strategies that is necessary when introducing an alternative strategy into the portfolio. The knowledge gap between this potential investor base the providers of the strategies has been one of many high barriers to entry for these investors, and the mutual fund wrapper helps to bridge this gap. The mutual fund vehicle offers transparency, scalability, and liquidity that partnership structures cannot, while adding the comfort and standardization of disclosures inherent in the regulatory oversight of a ’40 Act product.
Investors to See More Choice
No conversation about liquid alternatives would be complete without highlighting the risks that investors must understand prior to making an investment in one of these funds. While there are regulations that govern liquidity, diversification, and leverage within these Liquid Alt funds, investors still need to understand clearly how their money is being invested by the managers of these funds.
Investor Responsibility for Liquid Alts
When it comes to assessing the benefits and risk of a Liquid Alt fund, the responsibility doesn’t rest solely on the investors. As managers, we need to communicate the material details of our strategies efficiently, clearly and regularly. We need to do a better job understanding how our strategies are being used by investors and advisors in order to position ourselves as a solutions provider for them.
The Bottom Line
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