In a follow-up to a recent blog about picking a new mutual fund, let’s consider the alternative. Specifically, alternative mutual funds, which, according to an Associated Press story, are “hot, yet many investors have no idea what they do.” Excerpts from the AP story:
“These mutual funds go by a few names, and it doesn’t help that some are inscrutable like ‘liquid alts’, but they generally fall under an umbrella known as alternative mutual funds. Managers of alternative funds pitch that they can offer smoother returns than traditional stock and bond funds because they have access to more trading tools and markets.
“Investors plugged a net $35 billion into alternative mutual funds over the last 12 months, according to Morningstar. That’s more than went into bond mutual funds and nearly as much as into diversified U.S. stock funds. Over the last year, total assets of alternative funds have grown by 30 percent, not including investment gains.
“But the spurt of money doesn’t mean widespread acceptance. Mention alternative funds even to savvy investors such as financial advisers and the default response is often a shrug.
The AP story notes questions investors should ask about alternative funds:
• What do they do?
• What kinds of returns do they offer?
• What role should they play in a portfolio?
• What about the high price tag?
• What other risks are there?
This would be a question for Pension Parameters, 732-583-1313,