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By DailyAlts Staff Multi-alternative mutual funds offer varying exposures to different alternative strategies, often managed by separate underlying managers. Thus, it’s not surprising that the category has fairly wide dispersion between its best- and worst-performing funds on a monthly basis: In September, the funds in Morningstar’s Multi-alternative category returned an average of -1.15%, slightly outperforming a 60%/40% blend of the S&P 500 Index and the Barclays U.S. Aggregate Bond Index, which returned -1.31% for the month. The top fund in the category returned +5.57%, while the worst performer posted a monthly return of -5.08% – a difference of more than 1,000 basis points. Top Performing Funds in September AQR boasted the top two multialternative funds in September: the AQR Style Premia Alternative Fund (MUTF: QSPIX ) and the AQR Multi-Strategy Alternative Fund (MUTF: ASAIX ). The funds posted respective one-month gains of 5.57% and 4.19%, easily surpassing the 1.84% gains of #3-ranked Cornerstone Advisors Public Alternative Fund (MUTF: CAALX ). The AQR funds also significantly outclass the Cornerstone fund in terms of assets under management (“AUM”), and returns over the past three, nine, and twelve months. AQR’s QSPIX and ASAIX had respective AUM of $1.3 billion and $2.2 billion as of October 19, compared to the Cornerstone fund’s healthy $474.4 million in assets. QSPIX’s returns over the past three, nine, and twelve months through September 30 were +7.30%, +5.78%, and +13.56%; while ASAIX posted returns of +6.64%, +6.97%, and +12.38% for the given periods. The Cornerstone fund, by contrast, returned +1.74% over the three months ending September 30, and +2.83 and +5.87%, respectively, for the nine- and twelve-month periods ending on that date. Worst Performing Funds in September One month doesn’t make a year as we will see with the bottom performers in September, but does highlight potential risks in particular funds and the need to have a longer-term view. The following multi-alternative mutual funds were the worst performers for the month: Catalyst’s Macro Strategy fund may have had a bad September, losing 5.08% and ranking at the rock bottom of the category, but over the first nine months of 2015, the fund returned an astounding +28.86%! That total is far better than any of the nine-month returns for September’s top-performing multi-alternative mutual funds. The fund’s returns over the three- and twelve-months ending September 30 were +3.18% and +26.22%, respectively. The Quaker Event-Arbitrage and AIP Dynamic Alpha Capture funds lost 4.94% and 4.70%, respectively, in September. Unlike the Catalyst Macro Strategy Fund, the Quaker and AIP Dynamic funds had negative returns for the three- and nine-month periods ending September 30. Conclusion Multi-alternative funds cover a lot of ground – you can tell by a quick glimpse at their names. Terms like “style premia,” “macro strategy,” and “event-arbitrage” would seem to describe different styles, and these funds do have different emphases – which is why their returns can vary by such wide amounts. Not only was there a 1,065-basis point disparity between the best and worst multi-alternative funds in September, but those same funds had a more than 23% differential in the other direction for the first nine months of the year. Clearly, investors interested in adding multi-alternative exposure to their portfolios can’t make their decision based on one month’s worth of returns – this is especially driven home by the immense gulf between the Catalyst fund’s one-month and one-year performance. But beyond merely looking at returns, prospective multi-alternative investors need to conduct deeper due diligence to ensure they understand the exposures they’re adding to their portfolios. With effective fund selection, multi-alternative investing should improve portfolio diversification, and this could contribute to improved risk-adjusted portfolio returns. Past performance does not necessarily predict future results. Scalper1 News
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