Alternative Mutual Fund Liquidity Spectrum & Investment Comparison

Tuesday, March 26th, 2019 and is filed under AI Insight News

Alternative Mutual Funds experienced significant growth in total assets during and after the Great Recession as investors scrambled for investment options with a lower correlation to the equity/bond markets to protect their investments from increased volatility. Regulators followed the capital flows with heightened suitability concerns to the retail investor focused ‘40 Act structure given the non-traditional strategies and investments Alternative Mutual Funds use. This increases the risk and complexity profile compared to traditional mutual funds.

While there are similarities with Alternative Mutual Funds and traditional mutual funds, as well as other investments, there are key differences to be aware of such as liquidity, risk factors given the complexity of underlying strategies and the level of due diligence needed to remain regulatory compliant.


Due Diligence is a Necessary Obligation

FINRA’s e-learning course, Understanding Alternative Mutual Funds calls out, “Regardless of the funds’ regulatory regimes, firms are required to perform adequate due diligence on these products…”. Given the information in the above chart, we’ve determined that additional scrutiny is needed prior to advisors offering Alternative Mutual Funds to clients to make them aware of possible risks and help them understand these complex fund strategies.

AI Insight’s Alternative Mutual Fund Research can help with due diligence based on continued regulatory guidance using easy and efficient support tools to:

  • Review independent, unbiased reports addressing the breadth and diversity of alternative mutual funds as well as differences across the underlying strategies.
  • Evaluate an aggregation of insightful quantitative and qualitative data including fund company, strategy, portfolio and investment advisor overviews.
  • Run side-by-side fund comparisons based on 70+ features, such as strategy, exposure, fees and performance.