The ever-growing liquid alternative fund space expanded a notch with today’s launch of the AdvisorShares Sunrise Multi-Strategy ETF (MULT), an actively managed fund using a multi-model, multi-strategy quantitative investment approach that tactically takes long and short positions across various asset classes via exchange-traded products, futures, foreign currencies and U.S. Treasuries to provide long-term capital appreciation in any market environment.
The ETF is a collaboration between Bethesda, Md.-based fund sponsor AdvisorShares and Sunrise Capital Partners, a San Diego-based RIA and alternative investment shop. With the launch of MULT, AdvisorShares now sponsors 25 active ETFs with more than $1.9 billion in assets under management.
For Sunrise, the fund’s sub-advisor, MULT is its entrée into the ’40 Act fund space of liquid alternative products, a growing segment of funds from asset managers and hedge funds employing alternative strategies formerly reserved for institutions and accredited investors that are now being brought to the retail level with offerings compliant with the Investment Company Act of 1940 that governs open-end funds.
Sunrise oversees $175 million in client assets among high-net-worth individuals, small family offices, some foundations and a larger institutional-focused Wall Street investor with products that include a hedge fund and a separately managed account.
The MULT’s investment process uses a systematic algorithm that blends together numerous asset classes to create very low correlation to stocks and bonds while seeking to be profitable in any market condition.
Its quant strategy follows more than 50 different global financial and commodity markets and includes going long/short 15 equity index futures, 13 currency investments and seven bond investments; taking tactical long/neutral positions across 11 ETFs among equities and fixed income; and doing five currency crossrate-pair investments.
According to the company, MULT’s portfolio is flexible and can range from being invested in all of these different markets or just a handful, depending on which way the markets blow. The fund's net expense ratio is capped at 1.89 percent. The average expense ratio among the liquid alternative ETFs tracked by Morningstar Inc. is 0.88 percent.
Shock Absorber
Liquid alternative funds have been a growth area since the financial crisis, driven by investor demand for diversification and portfolio protection that are hallmarks of the alternative investment genre. But liquid alts on the whole have delivered subpar total returns vis–à–vis the stunning five-year run of the S&P 500 since its March 2009 lows, causing some investors to grouse they haven’t lived up to the hype.
If properly crafted, however, alternatives should provide some upside during good markets while acting as a safety net when markets tank. But they aren’t meant to beat the S&P 500 during raging bull markets such as in 2013.