Hedge Funds versus Mutual Funds (2): An Examination of Multialternative Mutual Funds

Posted: 21 Sep 2014 Last revised: 6 Apr 2019

Date Written: October 15, 2014


This paper examines those mutual funds classified by Morningstar as “Multialternative” within their “Alternative” mutual fund classification. It follows an earlier paper, “Hedge Funds vs. Mutual Funds: An Examination of Equity Long/Short Funds,” which found that equity long/short mutual funds did not materially differ from private placement hedge funds, at least as represented by broad hedge fund indices.

This new paper examines the performance of funds classified in the Morningstar data base as “Multialternative,” having further divided these funds into three more homogeneous subcategories: Global Asset Allocation, Multistrategy, and Replication. It begins by profiling this multialternative investment category, analyzes market exposures relative to hedge funds, and examines performance. In contrast to the analysis of equity long/short mutual funds, this paper presents data indicating substantive differences between multialternative mutual funds and private placement hedge funds.

The paper provides performance data for each of the three subcategories of multialternative mutual funds. These show that the performance of multialternative mutual funds is quite disappointing both absolutely and relatively. This is true both for indexes of all of the funds in each subcategory, and also when you look at distributions of individual fund performance. The data indicates that very few individual funds had any value added (measured by alpha) over any of the time frames examined.

Keywords: Liquid Alternative mutual funds, alternative mutual funds, hedge funds

JEL Classification: G11

Suggested Citation

McCarthy, David, Hedge Funds versus Mutual Funds (2): An Examination of Multialternative Mutual Funds (October 15, 2014). Journal of Alternative Investments, Vol. 17, No. 3, 2015, Available at SSRN: https://ssrn.com/abstract=2498695 or http://dx.doi.org/10.2139/ssrn.2498695

David McCarthy (Contact Author)

D.F. McCarthy LLC ( email )

PO Box 129
Stockbridge, MA 01262
United States

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