Liquid Alternatives

The Next Markets for ETF Disruption? Hedge Funds, Private Equity and SMAs

Hedge funds and private equity are two large markets with huge fees and lockup periods that are ripe for disruption by ETFs, says Matt Hougan of ETFs.com at their annual Inside ETFs conference. Such markets will continue to drive growth in assets in ETFs, which currently account for only $5 trillion of the $150 trillion in global assets. Despite their growth, trading in ETFs is falling, suggesting that ETFs...

More Collective Investment Trusts Being Added to DC Plans

There are now over 3,200 collective investment trusts (CITs) tracked in the Morningstar CIT database, collectively holding nearly $2 trillion according to a recent article that appeared on WealthManagement.com.  That’s up from $896 billion in 2008.  Callan Associates estimates that 71% of DC include at least one CIT in their plan up from 60% and 52% in 2014 and 2013, respectively Why are CITs becoming more popular?  Reasons included...

DC Plans Slow to Adopt Liquid Alts…But Why?

A recent article on Wealth Management.com titled “Liquid Alts in DC Plans? Don’t Hold Your Breath” discusses the relatively slow adoption of Liquid Alts by defined contribution (DC) Plans relative to what Defined Benefit Plans (DB) have done. The arguments for liquid alts, as the article presents, include managing return and risk management, managing volatility, potentially greater diversification, and a strategy less sensitive to broader equity and fixed income...

Global ETF/ETP Assets Forecast to Surpass Hedge Funds During Second Quarter

According to ETFGI, global assets in ETFs/ETPs are expected to exceed those in hedge funds.  At the end of the first quarter, ETFGI estimates that hedge funds contained just $13 billion less than ETFs/ETPs globally.  In Q1 alone, ETFs/ETPs gained $US96 trillion, compared to just US$18 trillion for hedge funds. Reasons for this growth include an “expanding toolbox of index exposures to various markets and asset classes, including hedge...

Algorithmic Hedge Strategies Outperform Human Managers in 2014

According to an article on CNBC this morning, systematic hedge strategies outperformed their human counterparts in 2014.  The best performing category within the segment was managed futures strategies, which gained 15.2% for 2014.  Falling oil prices, the climbing U.S. Dollar, and declining U.S. government bond prices were cited as trends that these funds were able to capitalize upon.  The entire article can be read here.

Investment News: “Alternatives: Key Piece of the Puzzle”

The case for traditional long-only allocations to stocks and bonds is getting weaker by the day, and that’s putting the financial advice industry, if somewhat reluctantly, on the junction of major change And so starts an extensive front-page article in a recent issue of Investment News.  The article goes on to provide a basic background of the growth of liquid alts with commentary from a number of advisors and asset...

How To Invest Like The Ivy League Endowments with ETFs

Seeking Alpha published an article by Prateek Mehrotra outlining how ETFs can help investors build institutional quality portfolios diversified into liquid alternative investments designed to improve long-term risk adjusted returns. The article summary The country’s largest endowments aim to preserve capital while producing income and appreciation with less correlation to the stock market regardless of market conditions. Performance among Ivy League endowments and retirement plans that invest like them...

Paper Explores How Liquid Alternatives Can More Effectively Diversify A Fixed Income Allocation

A “Blue Paper” titled It’s all About your Core from Pioneer Investment’s Thomas Swaney discusses how traditional diversified fixed income strategies may offer investors lower benefits than they think and that there may potentially be “equity-like risk” in non-treasury fixed income asset classes. Specifically, Swaney cites research showing that various asset classes within the fixed income space may have higher correlations to equity markets and investors must truly understand these risks within their portfolios.  In times of...

Use of Liquid Alts in Defined Contribution Plans is on the Rise

ETF Model SolutionTM’s Collective Investment Fund was mentioned today in an article on DailyAlts.com. “Last week, the Alta Trust Company and ETF Model SolutionsTM announced the launch of the Endowment CIF (Collective Investment Fund), which is designed to emulate the strategies of endowments, pension funds, and defined benefit plans. But instead of investing in illiquid alternatives like limited partnerships and private placements, the Endowment CIF will use alternative ETFs...

Rapid rise of Alternative Investments

Most alternative investment assets are held by institutional investors or by accredited, high-net-worth individuals and, according to Preqin, now total $6 trillion. Alternative investments include hedge funds, managed futures, real estate, commodities and derivatives contracts. But alternative investments aren’t just for institutions any longer. According to Morningstar alternatives investment analyst Josh Charney, $38.7 billion flowed into alternative investment mutual funds and ETFs over the year ended April 30, 2014....