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These high-risk liquid alt strategies also offer high rewards

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Hedge funds meet the masses

At a time when solid returns of any sort are hard to come by, it's not surprising to see market participants reaching for risk.

Hence the popularity this year of "dedicated short bias funds," Wall Street-speak for funds that blend strategies but on bias are betting against the stock market going higher.

Some $4 billion in net funds have flowed to this class of funds in 2015, according to Convergex's chief market strategist, Nick Colas, citing Lipper data. That makes it the third most popular of all the so-called liquid alternatives, or liquid alt, strategies that use hedge fund approaches but are packaged in mutual and exchange-traded funds (making them more "liquid" than traditional hedge funds).

The inflows come as investors have pulled more than $44 billion from the ETF.

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No wonder: Short bias returns this year have been stellar, with the funds gaining 16.2 percent in a third quarter that saw the benchmark stock index tumble 7 percent, Colas said. Through the first three quarters, short bias returned 6 percent, a period during which the S&P 500 fell nearly 7 percent.

Sounds great, right?