Five Sane Alternatives to Hedge Funds

On the one hand, mutual fund investors are being spooked by market volatility. On the other, those seeking refuge in money-market funds are most likely not even keeping up with inflation, thanks to the Fed's recent interest-rate cuts.

The good news is that a possible middle ground exists.

"Market neutral" open-end funds offer hopes of CPI-beating returns with the possibilities of avoiding some of the unsettling vicissitudes of the stock market. These are essentially Everyman's answer to hedge funds.

Hedge funds' high initial investment levels and lofty minimum net-worth thresholds place them outside the reach of most retail investors. But the open-end market neutral instruments, like the more traditional hedge funds, combine long and short ownership positions in attempts to add value, regardless of the general direction of the stock market. ...