New Rydex “alternative strategies” fund shows why the term is so hard to define
Apr 2nd, 2008 | Filed under: Hedge Fund Industry TrendsWith so many “alternatives” these days (alternative energy, alternative music, alternative lifestyles) it’s no wonder a recent survey found there was general confusion about the definition of “alternative investments”. Hedgeworld recently reported that David Reilly, director of portfolio strategies at Rydex Investments told a press conference “If you ask 10 people what alternatives are, you can get 10 different answers.”
Rydex’s response was to launch a fund of funds called the “Alternative Strategies Allocation Fund” that keeps things simple for investors by wrapping up various alternative investments into one vehicle. But don’t call it a fund of hedge funds because its total hedge fund content weights in at exactly zero percent. It’s actually a fund of: managed futures, commodities, currencies, real estate and tiny bit of, wait for it, hedge fund replication.
As the firm points out in a press release announcing the launch of the strategy, retail investors have had a tough time participating in the alpha-centric investment revolution so far:
“For years, institutional investors have used alternatives to help mitigate portfolio declines and enhance returns. Retail investor portfolios, on the other hand, tend to consist primarily of traditional assets such as domestic and international stocks, bonds and cash.”
Naturally, we fully support efforts to allow average investors to hold uncorrelated, alpha-producing assets. But the complexity of this particular product provides an interesting insight into why investors are apparently so confused.
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[...] There is a lot of confusion about what constitutes “alternative investments.” (All About Alpha) [...]
A better alternative is the Arrow Alternative Solutions Fund…..It’s a diversified long/short equity, fixed income and futures fund. No replication.