"Our costs may be higher, but the value proposition is there," says Levinson. "This is not an index-based or index-hugging strategy but one that requires specific trading and investment management expertise. And that is naturally going to be more expensive."
But he thinks investors will subscribe to the idea that paying a bit more for substantially lower risk and less volatility is worth it. "No fund is cheap if it's losing lots of money," he observes. "This fund is a great alternative to the multiyear lockups and illiquidity of a hedge fund, and it's much cheaper. And, its lower volatility helps investors avoid emotional responses to sharp market declines."
So far, he says, advisors seem to be using the fund in one of three ways. "Some use it as part of their alternative sleeve because it has a lower correlation to the stock market than most funds. Others use it for the large-cap domestic equity allocation for risk-sensitive clients, such as retirees or high-net-worth individuals, who want S&P 500-type returns without all the volatility. And some are using it as a bond surrogate because it has similar volatility characteristics to bonds without the interest rate risk of fixed-income investments."