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) - Get Report , 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.' Drilling down a bit deeper, 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 first ascertain if they are doing so for defensive purposes, or trying to outperform.