ETFs
There are also exchange-traded funds that follow a long/short equity strategy. The ProShares Large Cap Core Plus (CSM), which is rated five stars by Morningstar, returned16.67 percent in 2012 and has delivered 11.70 percent year to date. Both figures are in the top one percent for funds in this category. The fund’s expense ratio is 0.45 percent.
The AlphaClone Alternative Alpha ETF (ALFA) constructs portfolios based on the publicly filed holdings reports of top hedge funds, and is up 10.55 percent year to date, ranking in the 15th percentile in the category. The expense ratio is 0.95 percent.
Overall, Charney believes these funds do have a role to play in investors’ portfolios. “This category will offer investors a more muted risk profile,” he says. “If you are scared of equity exposure or want to hire extremely active managers, these funds can be appealing.”
For advisors looking to add equity exposure while minimizing market risk, or hoping to add active management that is truly active, these funds are worth a look.