Alternative investments are different. Not just in what they buy and how they perform (where, of course, acting differently is the whole point), but in how the industry operates. The rules that govern other segments of the fund business often don’t apply to alternatives.
For example, alternative exchange-traded funds have yet to make their mark. Whereas ETFs have siphoned customers away from traditional mutual funds—initially with domestic stocks, then international stocks, and now taxable bonds—they are an afterthought with alternatives investors. While leveraged ETFs have sold pretty well, they are not true alternative funds in the sense of being uncorrelated with the major markets. The real thing—categories such as long-short credit or managed futures—hold less than $4 billion in ETF assets.
John Rekenthaler does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.