Alts Democratized: A Practical Guide to Alternative Mutual Funds and ETFs for Financial Advisors + Website

A Comprehensive Review of the Liquid Alts Market and How ′40 Act Products Can Enhance Client Portfolios

"This book offers a simple, practical guide that helps investors benefit from their newfound access to advanced strategies. This brings power back to the investor and is the democratization of alternatives."
From the Foreword by Robert Jenkins, Global Head of Research at Thomson Reuters Lipper

The emergence of liquid alts is empowering advisors and their clients by democratizing access to sophisticated investment strategies. These "hedge fund strategies in ′40 Act wrappers" offer new forms of diversification and potential alpha, and are revolutionizing portfolio construction as advisors create new investment solutions to help clients reach their goals.

Alts Democratized and its companion website use Lipper′s classification system to provide a detailed analysis of liquid alts, including the factors that drive risk and return and the roles these funds serve in client portfolios. The book features more than 100 exhibits of Lipper data as well as in–depth interviews with executives at leading firms in the asset management industry. The authors offer insightful quantitative analysis and practical applications in this objective, authoritative, and comprehensive resource.

Foreword
Bob Jenkins, Global Head of Research at Thomson Reuters Lipper

Introduction

Chapter 1 Definitions and Methodology

Definitions

Lipper Classifications

The Future

Methodology

Guide to Chapters 3–13

Summary

Chapter 2 Roadmap for the Liquid Alts Space

Liquid Alts in Context

Assets and Net Flows

IPOs and Liquidations

Risk and Return

Summary

Questions

Chapter 3 Absolute Return Funds

Definition

Total Net Assets and Net Flows

Risk and Return

Factor Exposures

Asset Allocation and Fund Selection

Top Ten Funds

Blockbuster and Spotlight

Summary

Problems

References

Chapter 4 Alternative Active Extension Funds

Definition

Total Net Assets and Net Flows

Risk and Return

Factor Exposures

Asset Allocation and Fund Selection

Top Ten Funds

Blockbuster and Spotlight

Summary

Problems

Chapter 5 Alternative Credit Focus Funds

Definition

Total Net Assets and Net Flows

Risk and Return

Factor Exposures

Asset Allocation and Fund Selection

Top Ten Funds

Blockbuster and Spotlight

Summary

Problems

References

Chapter 6 Alternative Currency Strategies Funds

Definition

Total Net Assets and Net Flows

Risk and Return

Factor Exposures

Asset Allocation and Fund Selection

Top Ten Funds

Blockbuster and Spotlight

Summary

Problems

References

Chapter 7 Alternative Equity Market Neutral Funds

Definition

Total Net Assets and Net Flows

Risk and Return

Factor Exposures

Asset Allocation and Fund Selection

Top Ten Funds

Blockbuster and Spotlight

Summary

Problems

Chapter 8 Alternative Event Driven Funds

Definition

Total Net Assets and Net Flows

Risk and Return

Factor Exposures

Asset Allocation and Fund Selection

Top Ten Funds

Blockbuster and Spotlight

Summary

Problems

Chapter 9 Alternative Global Macro Funds

Definition

Total Net Assets and Net Flows

Risk and Return

Factor Exposures

Asset Allocation and Fund Selection

Top Ten Funds

Blockbuster and Spotlight

Summary

Problems

Chapter 10 Alternative Long/Short Equity Funds

Definition

Total Net Assets and Net Flows

Risk and Return

Factor Exposures

Asset Allocation and Fund Selection

Top Ten Funds

Blockbuster and Spotlight

Summary

Problems

Chapter 11 Alternative Managed Futures Funds

Definition

Total Net Assets and Net Flows

Risk and Return

Factor Exposures

Asset Allocation and Fund Selection

Top Ten Funds

Blockbuster and Spotlight

Summary

Problems

Chapter 12 Alternative Multi–Strategy Funds

Definition

Total Net Assets and Net Flows

Risk and Return

Factor Exposures

Asset Allocation and Fund Selection

Top Ten Funds

Blockbuster and Spotlight

Summary

Problems

Chapter 13 Dedicated Short Bias Funds

Definition

Total Net Assets and Net Flows

Risk and Return

Factor Exposures

Asset Allocation and Fund Selection

Top Ten Funds

Blockbuster and Spotlight

Summary

Problems

Chapter 14 Lipper Alternative Classifications Summary

Lipper Alternative Classification Roles

Absolute Return Funds

Alternative Active Extension Funds

Alternative Credit Focus Funds

Alternative Currency Strategies Funds

Alternative Equity Market Neutral Funds

Alternative Event Driven Funds

Alternative Global Macro Funds

Alternative Long/Short Equity Funds

Alternative Managed Futures Funds

Alternative Multi–Strategy Funds

Dedicated Short Bias Funds

Chapter 15 Portfolio Construction

Holistic and Goals–Based

Macro Environment

Correlations Converge

The Evolution of Investment Management After the Crash

Core/Satellite Investing

The Micro–Endowment Model

Summary

Questions

Chapter 16 Volatility Management

How Volatility Drag Reduces Compound Returns

Summary

Chapter 17 Suitability and Fees

Suitability and Results

Interviews

Fees

Summary

Questions

Chapter 18 Fund Selection

Five Key Roles

General Tips about Fund Selection

Summary

Chapter 19 Interviews

Dr. Stephen Horan

Managing Director, Co–Lead, Education, CFA Institute

Roger Paradiso

Director of Morgan Stanley Consulting Group′s Investment Solutions and Portfolio Development, Managing Director

Daryl Dewbrey

Head of Business Development

UBS Alternative Investments

Daniel Egan

Director of Behavioral Finance and Investing Betterment

Chapter 20 Conclusion

About the Companion Website

About the Authors

Index

JESSICA LYNN RABE is a Research Associate at ConvergEx Group, a global brokerage company based in New York. Rabe assists the firm′s Chief Market Strategist in publishing the ConvergEx MorningBriefing, a daily commentary on financial markets. Rabe has also published articles and contract research on the liquid alts industry.

ROBERT J. MARTORANA, CFA, owns Right Blend Investing, LLC, a Registered Investment Advisory firm based in New Jersey. Martorana manages client portfolios, analyzes alternative products, and is a consultant to the mutual fund industry.