Why I like certain alternative investments

[IncomeOriented]

@ Dennis QLENX is (by design) long/short with positive market exposure. A more appropriate comparison for BDMIX might be QMNNX, which is market neutral, long/short.

The problem I keep having with long/short funds, is that are equity funds with the inherent risk of equities. (when screening for me). When the market burps, they get sucked into the downdraft too. Market neutral seems to offer some respite from downturns in equity. A smoother ride.

 

[COcheesehead]

The problem I keep having with long/short funds, is that are equity funds with the inherent risk of equities. (when screening for me). When the market burps, they get sucked into the downdraft too. Market neutral seems to offer some respite from downturns in equity. A smoother ride.

Look at the R2 and Beta to understand correlation

 

[winyaz]

FYI, I ran the correlations of the Alt funds of interest to me in Portfolio Visualizer, back to 2021 except for ORR which only goes back to 2025. Average correlation and Annual Return / StDev / Avg Correlation are shown below as well. The AQR funds are a little more correlated to each other than I expected, but very uncorrelated to SPY, BDMIX, and ORR.

BDMIX. At first I didn't consider it due to a $2.5M initial investment requirement. But then checking on FIDO it seems there is no minimum investment requirement for Roth IRAs or TIRAs.

Thanks for this. I had ruled it out as well.

AQR has filed a notice that its Long/Short (QLENX) and Equity Market Neutral (QMNNX) funds will be closed to new investors on June 19, 2026.

And thanks for this. On the reasonable chance that the funds have underperformed for reasons other over investment, I took a small position in each just to keep my options open.

 

[COcheesehead]

FYI, I ran the correlations of the Alt funds of interest to me in Portfolio Visualizer, back to 2021 except for ORR which only goes back to 2025. Average correlation and Annual Return / StDev / Avg Correlation are shown below as well. The AQR funds are a little more correlated to each other than I expected, but very uncorrelated to SPY, BDMIX, and ORR.


Thanks for this. I had ruled it out as well.


And thanks for this. On the reasonable chance that the funds have underperformed for reasons other over investment, I took a small position in each just to keep my options open.

View attachment 64016

No surprise the Q’s somewhat align, but to me the attraction is what you discovered: little correlation to the broader market.

 

[SteveTX]

Thanks for the ALT's chart winyaz!
I placed a trade for BDMIX yesterday at Fido. Their info page had shown a high minimum, but the trade ticket didn't show a fee or minimum. My trade was over 40k for reference.
Alas, on checking my account this morning, the trade had been cancelled.
So today I placed an order for BDMCX, the same fund with a $1,000 minimum, but a 1% higher ER, ouch.
With it's low correlation to the market and the AQRs, decent returns, and a much, much lower STD, I think it's worth a try for my needs.

 

[Ozz]

BDMAX??

 

[SteveTX]

Yes, thanks Ozz! Not enough coffee today, ugh.

 

[winyaz]

What I am seeing in Fidelity:
BDMCX, ER net 2.34%, Min $1k, Deferred Load 1%
BDMAX, ER net 1.59%, Min $1k, Load 5.25%

 

[Semi-Retyrd]

In my routine screening on Fido for funds with high Sharpe, low volatility and good returns YTD I found a new market neutral candidate - BDMIX. At first I didn't consider it due to a $2.5M initial investment requirement. But then checking on FIDO it seems there is no minimum investment requirement for Roth IRAs or TIRAs. Since its distributions are twice a year and large, it is better suited for a tax deferred account anyway.
It is a large fund similar to QLENX but with a larger international tilt (QLENX is 60% North America, BDMIX is 43% North America). Both funds have little or no emerging market exposure.

The other major difference is BDMIX targets a market beta of zero where QLENX targets a market beta of .5.

My interest in BDMIX is in finding a good "wartime" fund as I expect the impact of the Iran war to linger through this year. I also have a continuing concern about market overvaluation which makes me want to avoid standard index funds like SPY or QQQ.

Initially I plan to replace my QMHNX position in my Roth with BDMIX.
View attachment 63892

I am also starting to evaluate CLSE for my taxable account as it has good tax performance given its ETF structure and has vastly outperformed ORR since the war started. More on this one later.


Cheers, Dennis

Here is an update on BDMIX. Last Friday I placed an order for BDMIX for around $60K in my Roth and it was accepted. Then on Monday I was surprised to see that Fidelity cancelled the order and gave me my money back. I called a Fido rep on Tuesday and he checked to see what happened.

It turns out the minimum order info for Fidelity's BDMIX page is supplied by Blackrock. However when Fido forwarded my order to Blackrock, it was denied. Apparently Blackrock can choose to deny an order even if their guidelines say it is ok.

I asked the Fido rep to press Blackrock on this and he said they are not allowed to do this. Then I asked him to have their back office change the data on BDMIX's fee page to reflect reality. He said he would pass this info along to them.

Bottom line - One cannot be sure to place an order less than $2M for BDMIX in an IRA regardless of what Fido currently shows on their fee page.

While the smaller minimum investment alternative to BDMIX is BDMAX which has a minor added distribution fee of .25% added to the expense ratio, the killer is BDMAX has a 5% load which varies somewhat for larger orders. Usually Fidelity gets their fund suppliers to waive the load and offers such funds with no fee. Not in this case.

So for the moment I have to reject BDMIX and BDMAX as alternative investments ... unless enough people complain to Fidelity/Blackrock to make them change their policy.

 

[Semi-Retyrd]

@ Dennis QLENX is (by design) long/short with positive market exposure. A more appropriate comparison for BDMIX might be QMNNX, which is market neutral, long/short.

You are correct. However QMNNX's performance has been even worse than QLENX, so I did not consider it. Also per my more recent post BDMIX seems to be out of the running due to incorrect info From Fidelity.

 

[FD1000]

Here is an update on BDMIX. Last Friday I placed an order for BDMIX for around $60K in my Roth and it was accepted. Then on Monday I was surprised to see that Fidelity cancelled the order and gave me my money back. I called a Fido rep on Tuesday and he checked to see what happened.

It turns out the minimum order info for Fidelity's BDMIX page is supplied by Blackrock. However when Fido forwarded my order to Blackrock, it was denied. Apparently Blackrock can choose to deny an order even if their guidelines say it is ok.

I asked the Fido rep to press Blackrock on this and he said they are not allowed to do this. Then I asked him to have their back office change the data on BDMIX's fee page to reflect reality. He said he would pass this info along to them.

Bottom line - One cannot be sure to place an order less than $2M for BDMIX in an IRA regardless of what Fido currently shows on their fee page.

While the smaller minimum investment alternative to BDMIX is BDMAX which has a minor added distribution fee of .25% added to the expense ratio, the killer is BDMAX has a 5% load which varies somewhat for larger orders. Usually Fidelity gets their fund suppliers to waive the load and offers such funds with no fee. Not in this case.

So for the moment I have to reject BDMIX and BDMAX as alternative investments ... unless enough people complain to Fidelity/Blackrock to make them change their policy.

Do as I did.
Dump Fidelity and go with Schwab and also get cash for the transfer.
Since I trade only mutual funds Schwab has more funds I want, especially smaller and newer ones.
You can buy BDMAX, MIN $1K, no fee.
You can't buy PIMIX and other Pimco I share last time I checked for years at Fidelity but you can at Schwab.

BTW, funds that I think I may need in the future I just buy a couple of shares in case they will be closed.

 

[Montecfo]

Do as I did.
Dump Fidelity and go with Schwab and also get cash for the transfer.
Since I trade only mutual funds Schwab has more funds I want, especially smaller and newer ones.
You can buy BDMAX, MIN $1K, no fee.
You can't buy PIMIX and other Pimco I share last time I checked for years at Fidelity but you can at Schwab.

BTW, funds that I think I may need in the future I just buy a couple of shares in case they will be closed.

Not sure this addressed the poster's larger problem with the minimum. The transaction fee is not a large issue for most people I don't think.

 

[FD1000]

Not sure this addressed the poster's larger problem with the minimum. The transaction fee is not a large issue for most people I don't think.

BDMAX has a load at Fidelity of 5+% but none at Schwab.

 

[Flieger]

BDMAX has a load at Fidelity of 5+% but none at Schwab.

So move for 1 fund.... ok.

Flieger

 

[Montecfo]

BDMAX has a load at Fidelity of 5+% but none at Schwab.

Ok I see that point now.

But if you want the widest selection of funds and most no load funds I believe the winner is actually Interactive Brokers (on those two criteria only).

They also waive the load on BDMAX, FYI.

 

[COcheesehead]

It’s a good, not great fund. I wouldn’t jump through hoops to buy it.

 

[COcheesehead]

QMHNX, QRPNX and QNZNX all up nicely on a down day. Will finish with a moderate positive gain overall for the day.

 

[acksurf]

My alts were up nicely today as well but not enough to get me anywhere near a gain!

 

[COcheesehead]

My alts were up nicely today as well but not enough to get me anywhere near a gain!

Almost a third of my portfolio is in these and it makes a difference

 

[Montecfo]

CLSE was up.

 

[COcheesehead]

CLSE was up.

Your experience motivated me to start a moderate position.

 

[Montecfo]

Your experience motivated me to start a moderate position.

I was thinking you may need to add alpha to balance your alternatives .

 

[COcheesehead]

I was thinking you may need to add alpha to balance your alternatives .

Your original post said Beta which based on today was actually more correct. All the AQRs outpaced it yesterday. So we’ll see what happens. If it outperforms QLENX which I dumped I’ll be happy

 

[Montecfo]

Your original post said Beta which based on today was actually more correct. All the AQRs outpaced it yesterday. So we’ll see what happens. If it outperforms QLENX which I dumped I’ll be happy

Man you and MichaelB read my posts before I can edit. It took me less than a minute to edit!

 

[COcheesehead]

Man you and MichaelB read my posts before I can edit. It took me less than a minute to edit!

It’s not reading the original post. I get an email of a response and the unedited version was there.