Liquid alternative products are losing their cool factor as investors pull their money.
Flows into liquid alternatives, or hedge-fund like mutual funds, have slowed to its weakest pace since 2008, Bloomberg reports. The strategies brought in just $1.2 billion from investors during the first five months of 2015, much lower than the $39 billion in 2014 and $96 billion in 2013.
“Stocks and bonds did so well last year that a lot of people asked themselves: ‘Why do I need to own alternatives?’” said Lawrence Glazer, managing partner at Mayflower Advisors in Boston, where he helps oversee $2 billion.
In previous years liquid alts performed well. But in 2014 the funds lagged, bringing in just 1.2% returns, compared to the S&P 500’s 14% and intermediate bonds’ 5.2%. Antsy investors pulled out, with J.P. Morgan, Goldman Sachs, and Pimco all suffering withdrawals. Writes Bloomberg:
“Alternative strategies are bound to lag when markets are going up as much as they have,” said Josh Charney, a Morningstar analyst.
Not that all the funds are missing out. The BlackRock Strategic Income Opportunities Portfolio, led by Rick Rieder, beat 80% of non-traditional bond rivals in the past year. John Hancock Global Absolute Return Strategies Fund brought in $1.9 billion in deposits last year, and continued a trend of positive returns.
Photo: Billy Gast via Flickr.