Hedge funds and the less-pricey liquid alternative funds that attempt to mimic them have generally underperformed thus far in 2016. Walter Davis, alternative investments strategist at Invesco (IVZ) , said they started off well when the market dropped to start the year, yet have foundered since stocks turned up in mid-February.

"It's been a tough environment because there has been volatility and a lack of sustained moves in the market," said Davis. "It's just been chopping around."

Davis said macro strategies have performed well in the first half of the year because of their flexibility. Real asset strategies like long-only commodity funds, MLPs and real estate also have been standouts, along with bank loans.

Investors interested in adding alternatives to their portfolios for the second half of the year need to ascertain whether they are doing so for defensive purposes, or trying to outperform.

"You need to line up the alternatives that you are looking at so it helps you achieve your investment goal," said Davis.

Davis suggested investors put 10% to 15% of their overall portfolio in alternative assets. He said the average retail investor has about 5% in alternative funds right now.

"There is certainly a long way to go there," said Davis.

Regarding the latest trend toward unconstrained, or go-anywhere, bond funds, Davis said the results have been problematic.

"If you have a good manager who gets it right, then it will pay off," said Davis. "But if you have a manager that is out of sync with the market, it can be painful."

"I love the promise of unconstrained bond funds, but the delivery of results has not been great," said Davis, adding that multi-asset funds have fared much better because of their flexibility.

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