Fund managers and private banks are bringing an increasing number of hedge fund-lite products down to the level of the investing masses, typically in a mutual fund structure. Is a hedge fund in your future, and in your long-term investing future's best interest?
Fidelity Investments' Portfolio Advisory Service, which offers managed accounts to people who invest at least $50,000, entered into an agreement with Blackstone Alternative Asset Management this year giving it exclusive access to Blackstone's Alternative Multi-Manager Fund. The mutual fund launched during the summer and invests in hedge funds offered by 11 advisors covering a variety of alternative investment styles, including equity long short and global macro.
To date, Fidelity Investments has placed $1 billion of its clients' assets into the fund, which has a net expense ratio of 2.4 percent.
What's in it for Fidelity's clients? "Investors are getting institutional access in a common structure that they are familiar with," said Fidelity spokeswoman Nicole Goodnow. "It's really a risk return improvement."
Fidelity has also been allocating a small portion of those clients' money to the Arden Alternative Strategies Fund, launched in 2012. The fund invests in hedge funds that employ a variety of alternative investment strategies, including relative value, event driven, global macro, and equity hedge. It has a net expense ratio of 2.3 percent.
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The numbers don't lie. Alternative mutual funds have seen a big spike this year in asset flows, year-to-date raking in near-$50 billion, according to Lipper. That's double the take for alternative mutual funds in calendar years 2011 and 2012. And that's after another banner year for equities. Some of the flows have gone to alternative credit strategies specifically, and many of these strategies are market neutral mutual funds that have been around for years, rather than the more recent trend to offer true hedge fund manager access to retail investors.