Alts Democratized: A Practical Guide to Alternative Mutual Funds and ETFs for Financial Advisors, + Website

Conclusion

Liquid alts are making inroads on both traditional mutual funds and hedge funds, and are a disruptive force that is democratizing access to strategies that had been historically restricted to high-net-worth investors. The growth of liquid alts is likely to continue as more investors learn about the value proposition of '40 Act funds, which offer lower fees, improved liquidity, and greater transparency and tax efficiency than traditional hedge funds. Not only does the democratization of hedge fund strategies make these strategies available to mainstream investors for the first time, but the '40 Act wrapper improves the attractiveness of these strategies for many affluent investors as well. In fact, our interviews found that large institutions use liquid alts in portfolios for high-net-worth clients. Liquid alternatives empower all investors with innovative opportunities to diversify, hedge tail risks, and achieve alpha.

This newfound access to hedge fund strategies is worthless, however—or even harmful—if advisors and investors do not know how to use liquid alts effectively in portfolios. We wrote this book to help financial advisors and sophisticated investors better understand the underlying strategies of these new '40 Act products, and properly use these funds via a goals-based portfolio construction process that begins with fund screening and selection and ends with a fully diversified, cost-effective portfolio. One such framework is the Micro-Endowment Model, which ...