More options make bets on alpha easier

As the mutual fund industry continues to migrate toward the alternatives arena, financial advisers might find individual fund selection among the more challenging parts of their job
OCT 10, 2011
As the mutual fund industry continues to migrate toward the alternatives arena, financial advisers might find individual fund selection among the more challenging parts of their job. That was among the topics covered last week at the alternative-investments conference. “Modern portfolio theory is not broken; it's just incomplete,” said Robert Hussey, executive vice president of Natixis Global Associates. “Until recently, advisers haven't had the vehicles they truly needed to act on modern portfolio theory,” he said. “But as the universe of alternative mutual funds grows, the challenge for advisers is going to be less about the macroeconomic issues and more about the microissue of picking the right funds and strategies.” In a panel discussion moderated by Nadia Papagiannis, Morningstar Inc.'s alternative-investment strategist, it was pointed out that alternative strategies are a growing part of the registered-mutual-fund space. “I'm a huge proponent of mutual funds and ETFs in the alternatives space,” said Robert Southard, principal at Greenrock Research. The biggest advantage of registered products over traditional alternatives such as hedge funds is liquidity, he said. With the mutual fund universe now including 250 alternative-strategy funds, the panelists agreed that there is virtually no excuse for clients' not having a significant allocation to alternative strategies. “I never go below 30% of a client's portfolio in alternatives because I want the protection,” said Richard Bregman, chief executive at MJB Asset Management LLC. Mr. Southard, who prefers allocations to alternatives of between 30% and 40%, said that the need for hedging risk is particularly significant in the fixed-income space. “Fixed income is not going to deliver like clients expect it to, and that's why a lot of it should be replaced by fixed-income alternatives,” he said. Email Jeff Benjamin at [email protected]

Latest News

No succession plan? No worries. Just practice in place
No succession plan? No worries. Just practice in place

While industry statistics pointing to a succession crisis can cause alarm, advisor-owners should be free to consider a middle path between staying solo and catching the surging wave of M&A.

Research highlights growing need for personalized retirement solutions as investors age
Research highlights growing need for personalized retirement solutions as investors age

New joint research by T. Rowe Price, MIT, and Stanford University finds more diverse asset allocations among older participants.

Advisor moves: RIA Farther hails Q2 recruiting record, Raymond James nabs $300M team from Edward Jones
Advisor moves: RIA Farther hails Q2 recruiting record, Raymond James nabs $300M team from Edward Jones

With its asset pipeline bursting past $13 billion, Farther is looking to build more momentum with three new managing directors.

Insured Retirement Institute urges Labor Department to retain annuity safe harbor
Insured Retirement Institute urges Labor Department to retain annuity safe harbor

A Department of Labor proposal to scrap a regulatory provision under ERISA could create uncertainty for fiduciaries, the trade association argues.

LPL Financial sticking to its guns with retaining 90% of Commonwealth's financial advisors
LPL Financial sticking to its guns with retaining 90% of Commonwealth's financial advisors

"We continue to feel confident about our ability to capture 90%," LPL CEO Rich Steinmeier told analysts during the firm's 2nd quarter earnings call.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.