AlphaCore in FundFire: Inflation Worries Drive Strong Liquid Alts Inflows

AlphaCore Wealth Advisory utilizes liquid alternatives as a “third leg to the stool” in a well-diversified portfolio. When building a wealth plan for our advisory clients, liquid alts can often play a vital role in helping our clients reach their long-term goals.

Now, after years of steady outflows, liquid alts have posted inflows for the third consecutive quarter, with Wilshire’s quarterly liquid alternatives industry report recording approximately $11.4 billion in net inflows during the third quarter and $36 billion year-to-date. Relative strategies comprised more than half of these inflows, with BlackRock, Calamos Investment and J.P. Morgan funds leading the way as the top products. What is causing this surge of new assets into the liquid alts space? FundFire turned to AlphaCore Wealth Advisory Director of Research Johann Lee for insight.

According to Lee, flows to the top three strategies are “clearly a reflection of investors seeking fixed income alternatives,” amid steadily lower yields and more persistent levels of inflation. He also tells the publication that inflows to J.P. Morgan’s equity hedge vehicles are part of the same vein by reflecting investors’ search for equity replacements to offer downside protection against cyclical slowdowns or a more vulnerable equity market.

One major impact of these inflows is the current “top-heavy” space with well-established firms controlling more assets, with many funds liquidating or reclassifying.

“Generally, for the quarter you saw a decrease in fund count and assets increase,” Lee explains, signaling that is a continuance of a secular consolidation trend that results in large wealth managers receiving most assets. However, he adds that a handful of smaller wealth managers are reaping the benefits as well.

“That’s what I interpret when I see these continued moves of alpha count continuing to build up, while fund count in the universe is generally trending down,” says Lee.

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