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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 14Lipper Alternative Classifications Summary

Synopsis

This chapter summarizes our research on Lipper's 11 alternative classifications. We evaluate the roles that these funds can serve in portfolios and how well the funds have functioned in these roles. We also discuss the relative size and historical popularity of each classification, the impact of blockbuster funds, and the degree to which funds in each classification are either homogeneous or heterogeneous.

Lipper Alternative Classification Roles

Table 14.1 summarizes the five roles that alternative funds can play in an investment portfolio. (In addition, all funds have the potential for alpha, or outperformance versus their benchmark.) Some alternative funds can serve more than one role, depending on the specific exchange-traded fund (ETF) or mutual fund, and the other holdings in an investor's portfolio.

Table 14.1 The Roles of Each Alternative Classification in a Portfolio

Classification Equity Complement Fixed Income Complement Portfolio Diversifier Tactical Hedge Directional Bet
Absolute Return Funds x
Alternative Active Extension Funds x
Alternative Credit Focus Funds x
Alternative Currency Strategies Funds x x
Alternative Equity Market Neutral Funds x x x
Alternative Event Driven Funds x x
Alternative Global Macro Funds x x x
Alternative Long/Short Equity Funds x
Alternative Managed Futures Funds x
Alternative Multi-Strategy Funds x x x
Dedicated Short ...

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