PT  - JOURNAL ARTICLE
AU  - Wei Ge
TI  - Liquid Alternatives as a Viable Investment Choice
AID  - 10.3905/jii.2015.6.2.108
DP  - 2015 Aug 31
TA  - The Journal of Index Investing
PG  - 108--113
VI  - 6
IP  - 2
4099  - https://pm-research.com/content/6/2/108.short
4100  - https://pm-research.com/content/6/2/108.full
AB  - Hedge fund returns can be parsed into three components: (1) traditional beta; (2) alternative beta; and (3) true manager alpha (Asness [2004]). Traditional beta components can be accessed easily and inexpensively with index funds or ETFs. Alternative beta components can be accessed via a new class of investments, liquid alternative investments (LAIs). LAI funds help investors to capture many of the unique return–risk characteristics of hedge funds, and may replace most or all hedge funds allocations in their portfolios. LAIs may offer the advantage of transparency, liquidity, reasonable cost, user-friendly format, and easier due diligence, even though they have their own limits and shortcomings. The core–satellite framework is both flexible and comprehensive, suitable to help investors make the decisions regarding liquid alternatives investments versus hedge funds.TOPICS: Real assets/alternative investments/private equity, exchange-traded funds and applications, portfolio construction