Liquid alternative products, the look-alike hedge funds wooing customers with promises of getting their money back more easily and paying lower fees to have it managed, now have something else to brag about: superior returns.
The average alternative mutual fund returned 4.36 percent in 2014, handily beating the average hedge fund's 3.78 percent return, industry research firm Preqin reported on Thursday.
Liquid alternatives have taken the investment industry by storm in recent years with promises of offering more than pure stock and bond bets and by signing up big name hedge fund firms to act as subadvisors.
Among so-called liquid alts funds, Daman Investments' Daman Fifth Fund was last year's best performer boasting a 232 percent return, Preqin reported. ProFund Advisors' Biotechnology UltraSector ProFund followed with a 45.2 percent gain.
Over a longer three-year period from 2012 through 2014, ProFunds biotech, health care and consumer services portfolios, plus the Merk Currency Enhanced U.S. Equity Fund, ranked as the best performers with gains above 10 percent.
"With lower barriers to entry, and superior performance in the past 12 months, these regulated and liquid products are proving attractive to retail clients and institutional investors alike," the Preqin report said.
A total of 53 new alternative mutual funds were launched last year, leaving assets under management at $240 billion.
Prominent hedge funds Jana Partners, Two Sigma Advisers, and HealthCor Management are managing pieces of liquid alternatives funds sold by mutual fund giant Fidelity while Brigade Capital Management and Graham Capital Management manage money for a Goldman Sachs fund.
This year the Goldman Sachs Multi-Manager Alternatives fund is up 4 percent, while Blackstone's Alternative Multi-Manager I fund, sold by Fidelity, is up 3.82 percent.
The average liquid alternative fund's minimum investment is $190,000, Preqin wrote, a fraction of the $1.3 million most hedge funds require.
