Alternative investments are gradually becoming accepted as a core component of an investment portfolio as a strategy that may help produce more consistent returns. Alternative mutual funds, including multi-alternative or multi-strategy funds have become a mainstay in the marketplace. We believe there are a few criteria that are critical in order to fully unlock the power of alternatives.
Rethinking asset allocation to incorporate a multi-alternative or diversified basket of funds, we recommend starting with the acronym D.E.E.P. (Diversification, Experience, Execution and Pure play) as a good framework to focus on what’s important when choosing lower correlated funds to fit into a larger portfolio.
Diversification is important to be able to deliver the right return profile and to reduce portfolio volatility. Each type of alternative investment has a different return and risk pattern, and each manager has a different approach. Selecting a diversified basket of mutual funds helps create lower correlated returns and an overall more stable return profile.
It’s important to evaluate whether the fund manager you are considering has the experience and qualifications to be able to invest in this sector effectively. Alternative investment funds should be managed by a tenured team with experience across direct alternative and traditional investment management, mutual fund investing and selection, and risk management. Broad-based experience, combined with a network of industry resources built through years of alternative investing, are important factors as well.
Using mutual funds allows for flexibility and agility in making shifts in the portfolio — or moving away from a manager you no longer have confidence in quickly. Other approaches to the multi-alternative space might take several weeks or months to make those types of changes. Multi-alternative investors should understand how nimble their funds are before investing.
The majority of multi-alternative mutual funds have exposure to traditional investments – stocks and bonds – which have a much higher market beta. The goal of an allocation to a lower-correlated asset class is to help mitigate volatility or provide a consistent return pattern in many different market environments. Make sure that you are getting a pure play in alternatives; or you may be disappointed in an environment where you need them to support your value.
We do not believe traditional investments have a role in an alternatives allocation because they diminish the diversification benefits and don’t help achieve the goals that alternatives are intended to meet.
An investor should consider the Miles Capital Alternatives Advantage Fund’s investment objectives, risks and charges and expenses carefully before investing or sending money. This and other important information about the investment company can be found in the Fund’s prospectus. To obtain a prospectus, please call 1-844-838-2120. Please read the prospectus carefully before investing... [Click here for important risk and definitions of terms.]
The fund is distributed by Unified Financial Securities, LLC (Member FINRA). Miles Capital, Inc. is the investment advisor. Investment in the Fund involves risk, including the possible loss of principal. An investment in the Fund is not insured or guaranteed by the FDIC or any other government agency.