(Read more: Is a hedge fund in your future?)
Vehicles that invest in existing hedge funds are a growing minority in alternative mutual funds.
There are about 30 today and have been boosted by recent launches in the space, including the Franklin K2 Alternative Strategies Fund, the Goldman Sachs Multi-Manager Alternatives Fund, and the Blackstone Alternative Multi-Manager Fund, a partnership with Fidelity.
Hedge fund firms that have launched modified versions of their strategies in a mutual fund format include AQR Capital Management, Avenue Capital Group, Whitebox Advisors and Visium Asset Management.
Overall, the largest alternative mutual funds are managed by John Hancock ($4.6 billion); Absolute Investment Advisers ($3.2 billion) and Natixis ($2.4 billion).
Fees for alternative mutual funds are usually about 2 percent. That's far lower that the mean management and performance fees for hedge funds of 1.66 percent and 19.15 percent, according to hedge fund data and news provider Absolute Return.
Traditional funds of hedge funds are even more expensive, usually adding on 1 percent and 10 percent management and performance fees on top of what's charged by the underlying managers.
The big question, of course, is performance.
For equity-focused managers—an area many see as ripe for conversion to public funds—the average alternative mutual fund gained 14.62 percent in 2013, according to Morningstar. That's lower than the S&P 500 index gain of about 30 percent but better than the Absolute Return U.S. Equity Index, which gained 12.66 through November (December returns were unavailable).
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Performance has been weaker over the last three years, with the average long/short equity mutual fund producing annualized returns of 5.74 percent and the average multistrategy liquid alternatives fund gaining 2.22 percent, according to Morningstar.
Managed futures-focused liquid alternatives that trade commodities and other assets have performed poorly over the last five years, declining an average of 4.81 percent.
McKinsey & Co. recently downsized its forecast for industry growth in part because of the problems with commodity funds. The consulting firm estimates that retail alternatives will control between 8 percent and 10 percent of $15.9 trillion in all mutual funds by 2017, according to materials provided to CNBC.com.
The projection had been for a 13 percent share of $13.3 trillion by 2015 in a Sept. 2012 report.
"Growth has continued to be strong across retail alternative asset classes, with the one exception being commodities," McKinsey told CNBC.com in a statement.