Liquid alternative mutual funds are growing faster than any other segment of the $15 trillion mutual fund industry, according to Morningstar research. Assets rose to $285 billion in the first quarter of 2014. There are more than 500 alternative funds competing for investors' retirement money. To put their nascence in perspective: over half of those have been created since 2008.
Alternatives have been a staple of the defined benefit component of U.S. retirement industry for decades. Massive private and public sector institutional funds deploy alternatives, a category that involves a vast array of investment strategies, as a way to add diversification and hedge against risk to enhance portfolio performance.
A recent purvey conducted by Pimco's DC practice probed 49 consulting firms that serve 7,800 clients with aggregate DC assets in excess of $2.8 trillion. Nearly all of the consultants surveyed (98 percent) support or strongly support the use of alternatives in custom target-date funds. What those consultants are saying is clear: the biggest risk in alternatives is in not accessing them.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
