‘Liquid Alts’ Needs to Go: Managers

Ignites article by Grace Jennings-Edquist with quote from Andrew Beer

Liquid alternatives may be ripe for rebranding.


The once-hyped product type has become associated with high fees and vague definitions, and avoiding the phrase “liquid alts” altogether might be the best option to help resuscitate sales, according to asset managers who have taken issue with the moniker.

…New York–based Goldman Sachs Asset Management recently suggested recategorizing liquid alternatives into groups that align with hedge fund classifications. Those five categories are equity long/short, event-driven, relative value, multi-strategy and tactical trading/macro, the firm stated in a report on the topic.

That proposal could mitigate “unrealistic return expectations or unwarranted concentration in a particular manager or strategy,” wrote Nadia Papagiannis, GSAM’s director of alternative investments strategy, in the report.

That recategorization might make returns of liquid alts groups easier to compare with their corresponding hedge fund indices, and it could help investors construct more diversified portfolios, Papagiannis stated.

However, dramatic renaming or marketing strategies aren’t necessary for the success of liquid alternatives in the future, says Andrew Beer, managing member of New York–based Beachhead Capital Management and author of a new report on the future of such products.

Advisors are increasingly relying on models built by home office research teams or third-party strategists — and model makers tend to focus on long-term results and cost, he notes. That trend bodes well for liquid alts, he says.

“They’ll find the products, if they’re good,” he says.

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April 20, 2017