The Evolution of Liquid Alternatives
Mutual fund investing involves risk including the possible loss of principal. Alternative investing involves the use of aggressive investment products and techniques that may cause greater volatility and less liquidity. Short selling theoretically involves unlimited loss potential since the market price of securities sold short may continuously increase.
There are no guarantees that the strategies or products mentioned will produce favorable results. The discussion of diversification is not intended as a recommendation for any specific individual nor does this strategy assure a profit or protect against a loss. The reference to liquid investments refers to investments that can be bought or sold during normal business trading hours.
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The following categories of alternative investments are referenced in the video clip:
- Hedged Equity: A mutual fund that seeks hedged exposure to the equity markets, through long and short positions in stocks.
- Long/Short Bonds: A mutual fund that seeks to take exposure to fixed income and credit-sensitive securities, long and short, based upon credit analysis of issuers and securities, and bond market views.
- Global Macro: A mutual fund that takes long and short positions in stocks, bonds, currencies and other investment instruments around the world based on economic or political views.
- Arbitrage: A strategy that seeks to take advantage of price differences between two or more markets or securities (such as merger arbitrage, the simultaneous purchase and sale of the stocks of two merging companies).
- Multi-Strategy Funds: A mutual fund, such as ALSOX, utilizing a combination of different alternative strategies to potentially enhance risk-adjusted returns.
Note: Mr. Lake was invited to present at the national SEC Hedge Fund Roundtable held on May 14-15, 2003. Panelists included a wide range of stakeholders in the hedge fund industry, e.g., fund managers, service providers, attorneys, accountants, investor advocates and foreign and U.S. regulators. Rick’s white paper for the event, “The Democratization of Hedge Funds,” analyzed the public policy issues of alternative strategies in mutual funds. Please note, that the white paper was not commissioned by the SEC and in no way represents endorsement or approval of any mutual fund or investment product. To state or imply otherwise is a criminal act."
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