However, the benefits may not always help investors due to the compounding effects of fees, Dahya warned. A hedge fund may include a normal management fee of 1% to 2% on top of a performance fees of as much as 20% of annual gains.
“There are many talented hedge fund managers tha tmore than justify their fees. However, some of the favorite hedge fund (and active mutual fund) strategies are now available within ETFs,” John Lunt, President of Lunt Capital Management, said.
Alternatively, Dahya argued that investors can access the diversification benefits of hedge fund strategies through a cheap and efficient investment vehicle like the actively managed JPMorgan Diversified Alternatives ETF (NYSEArca: JPHF), which is head up by Yazann Romahi, Managing Director and CIO of Quantitative Beta Strategies for J.P. Morgan.
JPHF was J.P. Morgan’s first actively managed ETF to hit the market, combining various hedge fund-esque, alternative investment strategies in an easy-to-use ETF wrapper. Specifically, JPHF includes equity long/short, event driven and global macro based strategies.
“JPHF has generated returns in excess of the cash benchmark and outperformed a global hedge fund proxy,” Dahya said.
ETF investors interested in an alternative investment position may consider a 10% to 20% of a portfolio allocation to liquid alt strategies, Dayha added. For example, JPHF may act as a core diversified alternative investment.
Financial advisors who are interested in learning more about alternative investments can watch the webcast here on demand.