Are Alternative Funds Living Up to Investor Expectation?

The rise of alternatives continues despite some disappointing performance numbers. We unearth the ‘alternative UCITS’ universe

Dan Kemp 5 July, 2017 | 1:42PM

For many retail investors, the world of “alternative investments” was off-limits until the launch of the more liquid hedge fund strategies in “UCITS” form several years ago. Their rapid growth in assets under management is evidence of their rising popularity; spurred by professed diversification benefits, lower returns from bonds and fresh memories of equity market losses in 2008 and 2011.

To make the most of these funds, investors need to understand how they differ from the long-standing alternatives such as private equity and traditional hedge funds. Investors also need to understand the role they can play to potentially improve outcomes in a portfolio. 

UCITS Funds vs Conventional Alternative Funds

You can think of the “UCITS” structure as offering a more regulated subset of the alternative fund universe. It has the aim of making these alternatives more suitable for individual retail investors, introducing limitations and protections not present in standard hedge fund and private equity fund structures. Constraints include limiting the use of leverage, concentration and keeping exposure to illiquid investments low, as well as preventing outright shorting.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Dan Kemp

Dan Kemp  is Chief Investment Officer, Morningstar Investment Management EMEA

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