To try a dose of alternatives, consider Aberdeen Diversified Alternatives (GASIX), which invests in a portfolio of about 15 mutual funds. The Aberdeen managers aim to provide protection in downturns and deliver some gains in bull markets. Most often the approach has worked. During the past five years, Aberdeen returned 13.5% annually and ranked as the top-performing multialternative fund. The Aberdeen portfolio managers have 9.9% of their assets in MainStay Marketfield. Other holdings include AQR Managed Futures (AQMIX) and Arbitrage Event-Driven (AEDNX).

Among the steadiest alternative funds is Calamos Market Neutral Income (CVSIX). It is focused on income and capital preservation. The fund has delivered a five-year annualized return of 7.13%, according to Morningstar.

Calamos may be particularly appealing for investors who seek to diversify bond portfolios. Bonds tend to sink in periods of rising rates. But the Calamos strategy can stay in the black during most market environments. "Investors come to us because they do not want surprises," says Calamos portfolio manager Chris Hartman.

Calamos invests part of its assets in a strategy known as convertible arbitrage. To implement the approach, the managers first buy convertibles, bond-like instruments that can be converted to stocks. Then the managers sell short the stocks of the convertible issuers. If the stocks fall, the convertibles could suffer losses. But the fund can stay in the black because the short sales should generate profits. If stocks rise, the convertibles will climb enough to compensate for the short positions, which should generate losses. The approach sank into the red when convertibles collapsed in the turmoil of 2008. But since then, the Calamos fund has delivered consistent returns.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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