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By Josh Charney, CFA | 05-21-2014 01:00 PM

An Atypical Alternative

This large alternative fund has outperformed the S&P 500 in volatile years, but investors should be mindful that the fund could experience more volatility in the future.

Josh Charney: MainStay Marketfield is one of the largest alternative funds at $20 billion in assets and certainly the largest long-short equity fund. The reason investors have flocked to this fund is because of its atypical performance. In 2008, the fund only lost 12.9%, but in 2009 it actually beat the S&P 500 and rallied 31.1%.

Michael Aronstein, the portfolio manager, and Michael Shaoul, the firm’s CEO, scour the globe for imbalances and look for macroeconomic trends. They play these trends through ETFs and in some cases individual stock selection, and sometimes they will even short entire markets such as was the case with Brazil, emerging markets, and China.

More recently, the fund has been long Japanese equities and European equities. So to manage risk, the managers keep correlations in mind, but in 2014, that hasn’t worked to their advantage. The fund is down 5.9%, as several of their bets have lost steam. Investors would be unwise to bail on this fund too quickly, but they should definitely realize that the fund could be more volatile down the road.

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