Ignites | Alt Managers to Advisors: You’re Judging Us All Wrong

Advisors weighing liquid alternative funds are often most swayed by a fund’s performance — but managers say they are concerned that three- or five-year track records on such strategies give an incomplete picture.

In a recent Ignites survey, 67% of respondents said performance track record is the most important factor to advisors when choosing between alternative funds. By comparison, 19% cited the fund’s brand as most important, followed by price (8%) and fund size (4%). In all, 157 people voted…

The focus on recent returns is reflected in sales data, says Highland Capital Management portfolio manager Michael McLochlin.

“When you look at where the most money is raised, it’s in four-star and five-star funds,” McLochlin says.

But picking the best performers from the past five years isn’t the best way to select liquid alts products, especially when advisors are weighing funds’ recent track records against the extended rally of the S&P 500, managers say…

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Ruozhou Wang