Alternatives Going Mainstream

These days, it seems we can’t get enough of alternatives. In fact, the growth in alternative strategies for the retail space over the last couple years has been such that the term “alternative” is becoming something of a misnomer. According to data released by Cerulli Associates and Strategic Insight/SIMFUND, alternative mutual funds account for 2.8 percent of overall mutual fund assets today. But Cerulli projects they will account for 9.7 percent of all mutual fund assets in five years, and 15.8 percent of assets a decade from now. “As these grow, the thought of them as ‘alternative’ or outside the mainstream will go away to a certain extent,” said Alec Papazian, senior analyst at Cerulli. And there’s a lot of room for growth, as a lot of advisors are just learning about alternatives, he said. Traditional style-box investing didn’t work for most people in 2008, so many clients are looking for new ways to diversify, whether through commodities, funds that short equities, or managed futures. Of course, many of these strategies are still very new, and the actual asset numbers are still rather small when compared to traditional funds. Financial advisors need to educate themselves, said Papazian.

Total Return Beats Total Return

Like father like son. Or so it seems with PIMCO’s Total Return ETF (BOND). Released just a few months ago, the ETF is meant to mimic the firm’s highly successful Total Return mutual fund (PTTRX). But not only is the ETF imitating the mutual fund version, it’s actually outperforming it. According to Morningstar, from BOND’s inception through May 4, the mutual fund returned 1.84 percent, while BOND was up 4.1 percent over that period. Morningstar says it’s the fastest-growing ETF ever, taking in more than $700 million in assets so far.