Growth of multialternative funds is accelerating.
Growth of the one-stop-shop alternative mutual fund category is accelerating. After the launch of 17 new multialternative funds and inflows of more than $4 billion in 2012, 13 new multialternative funds emerged during the first half of 2013, bringing the total number of open end funds in the category to 96. Also, $3.1 billion had flowed into the category through May 2013.
Interest in the category is not the result of stunning performance, unfortunately. The category average return was 3.5% in 2012 and negative 0.1% for the first half of 2013, distantly trailing a 60/40 portfolio of the S&P 500 and the Barclays U.S. Aggregate Bond Index over the same periods (11.3% in 2012 and 7.1% in the first half of 2013). Funds employing more active hedge-fund-like strategies received the bulk of the category's inflows. Over the last six months, John Hancock Global Absolute Return Strategies JHAAX saw the greatest inflows ($1.86 billion), followed by AQR Multi-Strategy Alternative ASAIX($422 million). John Hancock and AQR’s funds have returned 7.5% and 2.4% in 2012, and 1.2% and 2.4% in the first half of 2013, respectively. John Hancock’s offering is subadvised by Standard Life Investments, which runs the funds in-house using a mix of long short equity, fixed income, and currency and volatility strategies. AQR runs an in house mix of 9 alternative strategies, including managed futures, long-short equity, and convertible arbitrage.
The fund’s sole medalist, Bronze-rated IQ Alpha HedgeStrategy IQHIX, attempts to replicate the strategies of a group of hedge fund managers, and tries to forecast and overweight strategies that will outperform. The fund lost 47 million in the first six months of 2013, after posting a 4.8% return in 2012 and a 1.4% decline in the first half of 2013.