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Alts Democratized: A Practical Guide to Alternative Mutual Funds and ETFs for Financial Advisors, + Website by Robert J. Martorana, Jessica Lynn Rabe

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Chapter 10Alternative Long/Short Equity Funds

Synopsis

Alternative Long/Short Equity Funds are a popular gateway product for investors who are new to alternatives, and the classification has broadened beyond equities to include other asset classes. These funds are more homogeneous than most Lipper alternative classifications, which allows for more detailed and rigorous factor analysis and more direct comparisons of fund manager performance. The homogeneity of these funds enables them to be used nearly universally as an equity complement, and each fund offers various degrees of market exposure and factor tilts. Since there are more than 160 funds in the classification, investors have no reason to limit themselves to the classification's blockbuster, the MainStay Marketfield Fund. To help winnow these choices, this chapter has additional content about the fund selection process.

Definition

Funds that employ portfolio strategies combining long holdings of equities with short sales of equity, equity options, or equity index options. The funds may be either net long or net short, depending on the portfolio manager's view of the market.

Definition of the Lipper classification: Alternative Long/Short Equity Funds

The Alternative Long/Short Equity Funds classification originally focused on stocks, but has expanded to include bonds, commodities, and occasionally currencies. This strategy has a high correlation to equities—an attractive feature in bull markets when other alternative ...

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