Valtrend - Butler Business Valuation

Alternative Mutual Funds: Be Careful

Alternative funds which attempt to limit volatility use hedge-fund like tactics (and charge a higher fee for it all else being equal), including trading in futures, commodities, and short-term rates.  But unlike hedge funds, these “liquid alternative funds” do not lock in investors for set periods.  Thus, investors can pull out money any time they want, just like a normal mutual fund.  That may force managers to sell into a tumbling market, hurting longer-term performance (just like a normal mutual fund, except with higher fees).

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