Do You Use Hedge/Alternative Mutual Funds?

[nico08]

Hi. I read an article recently about using a hedge/alternative mutual fund as a partial substitute for bond portion of my asset allocation. I have listed a sampling of these types of funds below.

This newer breed of mutual fund claims to deliver hedge fund- like exposure, but is available in a mutual fund structure. They are mutual funds that employ investment tactics traditionally only found in hedge funds including the use of leverage, derivatives, and short selling.

Bonds and bond funds are predicted to not perform as well as they have in past and some suggest hedge/alternative funds as a (partial) alternative.

Do you have any of these hedge/alternative funds? If so. what percent of your total investment portfolio is allocated to them?

Long/Short Equity

ASTON/Anchor Capital Enhanced Equity Fund (AMBEX)
Performance (1-YR): 6.01% Expense Ratio: 1.23%

Bridgeway Managed Volatility Fund (BRBPX)
Performance (1-YR): 8.41% Expense Ratio: 0.95%

Burnham Financial Long/Short Fund (BURFX)
Performance (1-YR): 18.59% Expense Ratio: 1.75%

Market Neutral

AMG FQ Global Alternatives Fund (MGAAX)
Performance (1-YR): 1.40% Expense Ratio: 2.00%

Multialternative

Vantagepoint Diversifying Strategies Fund (VPDAX)
Performance (1-YR): 4.36% Expense Ratio: 0.49%

Dreyfus Dynamic Total Return Fund (AVGAX)
Performance (1-YR): 7.32% Expense Ratio: 1.50%

DWS Select Alternative Allocation Fund (SELAX)
Performance (1-YR): 1.45% Expense Ratio: 1.73%

[brewer12345]

Nope. Sucker bet, IMO.

I do own the two public merger arbitrage mutual funds, MERFX and ARBFX. Different animal, though.

[easysurfer]

To answer your question. No, I don't.

Just simple, boring index funds for me

[Totoro]

Quote:

Originally Posted by nico08 Hi. I read an article recently about using a hedge/alternative mutual fund as a partial substitute for bond portion of my asset allocation.

You'll be swapping out one asset class for another with a likely very different risk profile.

I'd suggest you check out bogleheads.org

Long story short, answer this question first: how will you choose a good manager where you'll be sure he or she will be worth more than his expenses?

Hedge fund are notorious for incomplete reporting, survivorship biases and high fees. Caveat Emptor

[MooreBonds]

The only "alternative" funds I had positions in were PCRDX/PCRIX. Run by PIMCO, they sought to somehow track inflation in commodities.

I understood that they weren't going to be a perfect correlation....but the divergence was absolutely abysmal, to say the least, due to a few factors of the nature of rolling over futures/futures options/contango/reverse contango/supply shocks/etc.

Nowadays, I simply have positions in more direct holdings, like mining firms, agriculture firms, etc.

Have been thinking about putting some into the arb funds that Brewer has mentioned from time to time...