Liquid alternative funds could provide the answer to the current
investor appetite for additional portfolio liquidity and
diversification, Forbes contributor Basil Williams argues.
Some funds have focused on maintaining liquidity to fit into a
UCITS or '40 Act structure at the expense of overall
performance, he writes. However, the market volatility of the past
six months has shown that well-structured funds can play a valuable
role in diversifying risk. Investors require options beyond long
equities or long bonds, but Williams states that doing so within a
liquid fund requires both a manager with skill in fixed-income
relative value investing and a portfolio that is structured in a
way that allows it to trade in a manner similar to its
corresponding offshore strategy: by "continually seeking out
mispriced assets, acquiring them, hedging the resultant macro risks
and then selling them when the expected realignment of value is
realized."
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