Investing in alternative assets typically relies less on publicly available information and more on a manager’s ability to analyze and underwrite its investments.

The manager impacts the performance of alternatives

The chart below shows that the range in performance between the top- and bottom-decile managers of alternative strategies is significantly larger than that of traditional strategies. For example, the difference in returns between the top and bottom long/short credit fund managers has averaged more than 26%. For event-driven fund managers, the dispersion of returns is even higher at more than 30%.

For traditional investment strategies, such as domestic stock and bond funds, the range of returns between top- and bottom-decile managers is just 11.1% and 5.4%, respectively.1 These sizable differences demonstrate why investors must carefully consider an alternative asset manager’s track record and experience before investing.

Performance spread between top- and bottom-decile managers (2005–2014)

25% 15% 5% 0% -5% -15% -25% Traditional strategies Alternative strategies -6.1% Stocks 5.0% Relative value 13.3% -10.5% Long/short credit 12.9% -13.2% Event driven 18.0% -12.5% Global macro 17.3% -16.1% Managed futures 19.3% -16.3% Long/short equity 21.5% -16.4% Bonds 2.5% -2.9% Source: Morningstar. Lipper TASS database. Bonds represented by Morningstar U.S. Core Bond Funds. Stocks represented by Morningstar U.S. Large Cap Core Funds. Alternative strategies represented by the following TASS fund classifications: Fixed Income Arbitrage (Long/short credit), Convertible Arbitrage (Relative value), Long/Short Equity, Event-Driven, Global Macro and Managed Futures. Performance measured from December 31, 2004, through December 31, 2014.


In the context of alternative investments, higher returns may be accompanied by increased risk and, like any investment, the possibility of an investment loss. Investing in alternative assets relies less on publicly available data and more on a manager’s ability to analyze and underwrite its investments. Therefore, alternative investments may be subject to higher costs and fees than traditional investments. Investors should be aware of the benefits and risks of each investment and seek the advice of a qualified investment advisor before investing.

1 Performance measured from December 31, 2004, through December 31, 2014.


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