NEW YORK (TheStreet) -- Alternative investments can help investors shield themselves from risks in securities markets as the economy stumbles, says Rick Lake, who helps manage the Aston/Lake Partners LASSO Alternatives fund (ALSOX) .
The long-short mutual fund, which invests in other funds, is little changed this year as its peers have declined 2.7%. Aston/Lake Partners LASSO Alternatives Fund has beaten 82% of its rivals so far in 2010. The fund makes money by using some of its assets to bet on falling securities prices.
Welcome to TheStreet.com's Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks and views on the market in a five-question format.
Why is now a good time for alternative investments?
First of all, we are all risk managers at this point in the market. And there are three reasons why we look at alternatives: as tools for risk management, as additional sources of return beyond market directions and for diversification.
What is your favorite long-short equity fund and why?
We have lots of favorite long-short equity funds. One we're very interested in now is the
Weitz Partners III Opportunity Fund
, which is run by longtime value maven Wally Weitz. This used to be his hedge fund. It was converted to a mutual fund, and it has a concentrated mix on the long side and some interesting hedges for market volatility on the short side.
On the fixed-income side, what's your favorite long-short fund?
Our favorite long-short fixed-income fund is the
Eaton Vance Global Macro Absolute Return Fund
, which looks for income opportunities long and short around the world. They have a very prescient management team. For example, they were short Greece five years ago, which is pretty impressive.
Another strategy you look at is merger arbitrage.
Investors have been interested in arbitrage to capture smooth returns independent of market direction. In terms of merger arbitrage, with all sorts of cash on company balance sheets, they're out on the hunt to do strategic deals. That means they're doing takeovers, and that gives merger arbitrageurs more things to do.
What do you make of all the brand-new long-short mutual funds hitting the market?
We think it's a great thing. This is the democratization of hedge funds. It's bringing alternative strategies to the people. So the wide variety of long-short mutual funds and the variety of strategies available is frankly a great development for individual investors.
-- Reported by Gregg Greenberg in New York.
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Before joining TheStreet.com, Gregg Greenberg was a writer and segment producer for CNBC's Closing Bell. He previously worked at FleetBoston and Lehman Brothers in their Private Client Services divisions, covering high net-worth individuals and midsize hedge funds. Greenberg attended New York University's School of Business and Economic Reporting. He also has an M.B.A. from Cornell University's Johnson School of Business, and a B.A. in history from Amherst College.