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Asset Allocator

from Asset Allocator

Alternative reality

The US economy may be embarking on a different path to the rest of the world, with recent GDP growth numbers very positive, at least at the headline level.

But that wasn't enough to help the funds industry there, at least according to the latest data from Cerulli Associates, which showed the overall size of the mutual fund market is down 25 per cent year to date, with over $8bn wiped from the asset class in September alone. 

But there was one bright spot amid the gloom, with the category they call liquid alternatives recording positive inflows in September of several hundred million dollars.

Alternatives of course are supposed to provide diversification from bonds and equities, something which is intuitively a good idea in the present climate.

But often the challenge facing allocators is that to reduce correlations, one has also to reduce liquidity (for example by owning infrastructure assets), and no one wants to be less liquid when investors are stomping towards the exit and rates are rising. 

That's why Asset Allocator has been hearing from more and more folk on the street who are looking at strategies such as hedge funds and absolute return funds for liquid alternative exposure right now. 

Average exposure to alternatives in our database is continuing to rise, as we have mentioned before.

Exposure to funds such as absolute return, multi-asset and hedge funds is now 9.2 per cent. Plus there is an average exposure of 5.5 per cent to property and/or infrastructure.

The most popular such mandate among the allocators we cover is Janus Henderson Absolute Return, which is owned by nine of the allocators on our database, with five new purchasers this year, and three sellers.

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