The Hedge Edge Moves to Mutual Funds
By Hal M. Bundrick
NEW YORK (MainStreet)--The landscape for tactical investments is undergoing a sea change. Hedge funds are being trimmed, while alternative strategy mutual funds are gaining favor, according to a national surveyregarding the use of alternative investments by institutions and financial advisors conducted by Morningstar and Barron's.
Money poured into alternative mutual funds last year with inflows of $19.7 billion, while Morningstar estimates that among funds in its database, $7.6 billion flowed out of single-strategy hedge funds.
"Alternative mutual funds and ETFs have grown in breadth and quality in recent years," Nadia Papagiannis, director of alternative funds research for Morningstar, said. "Institutional investors are starting to see alternative mutual funds as substitutes for hedge funds, and more financial advisors are incorporating these liquid, transparent investments into their client portfolios."Institutional money managers favor long-short tactics and are replacing hedge funds with mutual funds to tap the strategy. 45% of institutions said they access long-short strategies via mutual funds, up from 38% in 2010. Long-short hedge funds accounted for just over one-quarter (26%) of institutional holdings in 2012, a long fall from the from 61% allocation held in 2010.
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