That’s why Grant Engelbart, portfolio manager at the $7 billion CLS Investments, says he plans to use more alternative funds next year. While he typically allocates as much as 15% of assets to liquid alts, Engelbart stresses the need to scrutinize these funds, since many are highly correlated to the assets people are looking to diversify away from.
That’s borne out by Morningstar research, which will launch a style box for liquid alternatives in 2017. The tool should help investors compare the motley mix of complex funds that fall under the liquid-alternative category, gauge how they fit in with their other investments, and determine if managers have actually delivered on the diversification and smoother ride they promise.