After a tough start to the year, the liquid alternatives sector experienced another decline in assets and a contraction in the number of funds available in the second quarter. What is the reason behind the continued drain in the liquid alts space? FundFire turned to Johann Lee, CFA, director of research at AlphaCore Wealth Advisory, for insight.
According to Lee, the strong performance of publicly traded stocks this year is causing doubts to emerge from some investors regarding the need to introduce new allocations to liquid alternatives. As a result, when discussing potential allocation with prospective clients, Lee highlights the compatibility of liquid alternatives within portfolios and encourages investors to conduct thorough research when selecting fund managers.
“The challenge is the messaging with being disciplined on the client side,” Lee explains. “People question the allocation in a year that stocks are soaring.”
To further ease any hesitations, Lee says that AlphaCore is also actively conducting their own due diligence on managers, with a particular focus on the multi-strategy sector. “You don’t want to take shortcuts,” he tells the publication. “You want to put your head down and do a lot of homework before selecting a manager in the alts space.”
As interest rates continue to rise and equity volatility persists, now is not the time to turn away from allocating toward alternatives. Here at AlphaCore, we firmly advocate the integration of liquid alts within portfolios for proper diversification that can help fortify your wealth against any potential market downturns that may lie ahead.
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