It's all the more prudent to have defensive and opportunistic parts of a portfolio when the market hits new highs, and that combination is what long/short funds provide, says Rick Lake, portfolio manager for the ASTON/Lake Partners LASSO Alternatives Fund. One of Lake's top holdings is the highly-concentrated Weitz Partners III Opportunity Fund because of the managers' skill in finding event-driven stocks. Lake also likes the Touchstone Merger Arbitrage Fund, considering its lack of correlation to the market and the spike in M&A this year.

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