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Liquid alternative strategies
Liquid alternative strategies © JohnKwan/

Liquid alternative strategies

Joe Jennings, director of investments for PNC Wealth Management in Baltimore, says investors should consider an allocation to investments involving these strategies. The strategies generally consist of investing in mutual funds. They are alternative in that, like hedge funds, they aren't long-only stock and bonds funds. They are liquid in that they can be traded much more easily than hedge funds.

Examples include long-short equity funds, market neutral, managed futures, multi-alternative and nontraditional bond funds. PNC includes real estate and commodities, too.

"Liquid alternative strategies are intended to have a low correlation to stocks and bonds and provide a hedge against volatility, adding more stability to your portfolio," Jennings says. "That's particularly relevant in light of the recent volatility. They're good anytime, but given the uptick in volatility, it's a particularly opportune time."

Jennings recommends diversification across the asset class.

To be sure, fees are often higher for liquid alternative mutual funds than for standard stock or bond funds, and the funds' strategies can be difficult to comprehend. "Do be mindful of fees and understand what you own," Jennings says.


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