The number of hedge fund mutual funds or liquid alternative funds has increased from 343 at year end 2007 to 838 at year end 2012. Assets under management are $90.3 billion, an increase of 14% over the same timeframe. Neil Siegel, Managing Director and head of global marketing and product development at Neuberger Berman, and Evan Mizrachy, head of retail alternatives at BlackRock Alternative Investments, believe that retail investors and their 401(K) and IRA accounts are under-served by and under-allocated to alternatives. Expanding into this segment would diversity hedge funds' client base. On the other hand, retail investors demand daily liquidity requirements which would limit their investment universe and, maybe, performance.
According to Morningstar, the strategies run by these funds are led by long/short ($25.8 billion), market neutral ($19.5 billion), multi alternative ($17.5 billion), currency ($11.7 billion), managed futures ($8.5 billion), short ($6.8 billion) and trading ($449 million). Of course, these assets under management are clearly miniscule when compared to the $13.1 trillion in US mutual funds according to the Investment Company Institute.
The oldest fund, Merger Fund, has been around for 23 years using merger arbitrage strategy to give investors assets with low correlation to stock markets and volatility. Two major institutions, FMR and Blackstone have also moved into this space. FMR, parent company of Fidelity Management, uses Arden Asset Management to manage their alternative vehicles while Blackstone Alternative Asset Management is building their business organically. The largest manager by far is PIMCO but their investors are mainly institutional.
The source for this article can be found at Pensions & Investments.
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