Mind the Gap -- Alternatives Edition
Investors in alternative funds aren't faring any better than the rest of the fund world.
When Russ Kinnel provided the latest update of his "Mind the Gap" study, he did not include alternative funds in the results. Russ focused on the 10-year history--certainly the most valuable time frame to observe a full market cycle--but there are too few alternative funds with a long enough history to constitute a meaningful sample size.
We do have data from the three- and five-year periods, however, which roughly covers the period in which liquid alternative mutual funds have exploded on to the scene. The data rely on the same methodology Russ has outlined in the past. Below, we compare the average investor's returns versus the average fund returns. We look at monthly fund flows and monthly returns, then we weight those by asset size to come up with an estimate of returns for the average investor. We then compare those figures with the average fund return on a category and asset-class basis. The gap between those returns tells us how well investors timed their investments. Returns were calculated through the end of 2014.
Josh Charlson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.