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Fund Spy

The Year in Alternative Funds

Investors and fund companies press the pause button in 2015.

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The news in late December 2015 that Whitebox Advisors, a Minneapolis-based asset manager, would be closing its three liquid alternative funds in 2016 added a fitting denouement to a bumpy year for alternative-strategy mutual funds. Whitebox was a well-known hedge fund firm that had entered the mutual fund world with some fanfare in 2011, on the strength of the reputation of the firm's founder, Andrew Redleaf. After some early success, Whitebox Tactical Opportunities (WBMIX) reached as high as $1 billion in assets. But after poor performance in 2014 and devastatingly bad performance in 2015 (negative 21% for the year), investors pulled assets in droves, forcing the firm to shutter its lineup.

During the past few years, many hedge fund managers have moved into mutual funds, lured by the promise of a new investor base and source of revenues. Many have found it a tough go, however. Whether it is the challenging global financial markets, the liquidity and leverage limitations of 1940-Act mutual funds, and/or the difficulties of managing money in a daily liquidity environment, performance success has been hard-won.

Josh Charlson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.