As the traditional asset allocation of 60% stocks and 40% bonds has left many investors lacking in downside protection, investors have increasingly added liquid alternatives to their asset allocation mix. Leading the pack in inflows for the third quarter of the year was the global macro funds category, while many other areas saw a slight pullback as caution amongst investors grows.
To learn more about the current state of the liquid alts space, FundFire turned to AlphaCore Director of Research Johann Lee, CFA, director of research at AlphaCore Wealth Advisory, a firm that incorporates liquid alts into client portfolios for wealth-protecting diversification.
According to Lee, many investors moved their assets into liquid alt strategies and areas that ended up performing quite well. With all these recent moves in assets such as currencies and commodities, trend-following investors have performed well so far in 2022 and Lee says it’s “no surprise that macro funds continue to be recipients of flows.”
Also impacting recent inflows is the year’s persistent market volatility, which has caused many risk-averse asset managers to avoid launching any new funds. “It doesn’t surprise us that there is some consolidating going on,” Lee explains. “The macro environment is difficult.”
Despite the challenging environment, Lee believes investor interest and conversations on the liquid alt space remains elevated overall. “If you’re really a long-term investor with a focus on stronger risk-adjusted returns… then we would say, ‘Hey it’s still not a terrible time to incorporate liquid alts and alts strategies for some portions of your total portfolio,’” he tells the publication.