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A relatively new alternative fund category known variously as multi-alternatives, multi-strategy and multi-manager has been attracting inflows and piquing the interest of numerous financial advisors.
There are 148 funds with some $52.7 billion in assets in the multi-alt category as defined by Morningstar and most of them got their start in the wake of the 2008 crash.
These funds constitute a subcategory of the larger liquid alternative funds universe and are designed to give individual investors exposure to hedge fund-like investment strategies, but without requiring hedge fund minimums or charging hedge fund-like fees.
"Multi-manager funds offer a variety of strategies plus access to hedge fund managers in a mutual fund format," explains Josh Charlson, director of manager research for alternative strategies at Morningstar.
"The major mutual fund companies are placing a great deal of emphasis on developing products for this category, and they're competing with firms that are entering this space from the hedge fund side of the industry, like Blackstone. This is creating a lot of interesting funds to choose from."
Multi-alternatives include hedge-fund replication funds, funds with global macrostrategies and other multi-strategy funds that pursue more than one alternative approach, such as long/short and relative value.
Some of these are run by a single manager, but a majority of the funds are multi-manager, employing several investment managers, each pursuing a different investment strategy.
Many Young Funds
Most multi-alt funds are less than five years old. In 2004, according to Charlson, there were only eight of these funds, but by 2008 the number had swelled to 40, and by year-end 2014 they numbered 144.
The growth spurt occurred as investors were seeking safer havens in the aftermath of the 2008 financial crisis.
Around that same time, hedge funds began to experience significant outflows as...