Make Sure Your Liquid Alternative Is Not Simply a Sector Fund

Investors should make sure their liquid alternative funds are not merely commodity or infrastructure stock funds, said Keith Black, Managing Director at CAIA. Black added that unscrupulous advisers often pitch long-only stock funds as liquid alternatives even if that is indeed not the case. He said investors should compare fees, track records and performance in a declining market when shopping for a liquid alternative fund. Furthermore, Black said investors should check to see if the fund lowers the correlation and risk in their portfolio in order to prevent it from being overly one-directional.