Mass Market Alternatives Keep Coming

The fund management arm of Hartford Financial, the insurance company, is preparing an alternative investment trust. This month BlackRock launched three mutual funds with alternative investment strategies. These are the latest in a long-time trend—-alternative products that target a broad market.

So far, these vehicles remain relatively small. BlackRock’s iShares Diversified Alternatives, in operation since October 2009, has about $133 million in assets—a modest amount relative to BlackRock’s hedge fund operation. The firm manages $115 billion total in alternative assets including hedge funds, funds of funds, private equity and real estate.

iShares Diversified Alternatives seeks to profit from price discrepancies and deviations from historical norms in commodity, bond, currency and interest rate futures. There are several sub-strategies that together constitute a comprehensive arbitrage program with exposure across major asset classes.  Investors could use it as a substitute for global macro hedge funds or commodity trading advisors.

The expense ratio is 0.95%, low in comparison to hedge funds and CTAs that utilize similar arbitrage tactics. Performance has been lackluster year to date—-down 3% as of the end of September. On the other hand, this is a portfolio diversifier with low correlation to US and world equities as well as debt markets.

The three new BlackRock funds have long/short emerging market equity, long/short credit and commodity strategies.

The planned Hartford alternatives fund is to allocate to various asset classes including commodities, real estate investment trusts, currencies, emerging market debt and emerging market equity.

With the new offerings BlackRock and Hartford are catering to investors that want diversification and in particular exposure to commodities and emerging markets.

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Tags: BlackRock, Hartford Financial, ishares, REITS