According to Morningstar, the assets invested in alternative mutual funds (not all alternative funds are hedge-like, but many could be called that) grew from $36.4 billion at end of 2008 to $49.6 billion at the end of 2009. They went from $95 billion at the end of 2012 to $139.4 billion at the end of 2013, a 47 percent increase.
There were 514 alternative funds at the end of 2008, according to Morningstar. That grew to 914 funds at the end of 2012. The number jumped to 1,153 at the end of 2013. There were 1,199 such funds at the end of May.
Why the big jump in 2013?
"I don't think there's anything magical about 2013," Charlson said. " I think that something of a tipping point has been reached where product manufacturers have recognized the need and potential for alternative vehicles and have put a lot of development over the past couple of years that came to fruition last year."
Managed Futures Funds
Included in the global hedge fund universe are managed futures funds, a category that has done poorly over the last few years but could be poised for a rebound. One company in the space, Denver-based 361 Capital LLC, started 361 Managed Futures Strategies Fund in December 2011. The fund has had positive returns during a period when other futures funds have had negative results, said Brian Cunningham, president and chief investment officer of 361 Capital.
The fund trades future contracts that bet on what the domestic stock indexes, such as the S&P 500, are going to do over the short term, he said. The fund typical trades futures pegged to just three days ahead, Cunningham said.
361 tries to zig when others zag, he said. "It's a countertrend fund," he said. "We look for opportunities where (stocks) are overbought or oversold." The fund has $636 million in assets and it plans to close to investors when that total reaches $1 billion, Cunningham said.
If it went above $1 billion, the fund might not be agile enough to trade successfully, he said. Changing the strategy of a huge hedge fund is like trying to turn a battleship around, he explained.
The company started another managed futures fund, 361 Global Managed Futures Strategy, in February, Cunningham said. That fund trades futures based on the indexes of foreign stock markets.
The domestic futures fund, and the new one, are marketed almost exclusively through registered investment advisors, he said. But many of them advise clients who would not be considered wealthy, he said.
The 361 domestic futures fund had a three-year return of 1.094 percent and a one-year return of 3.881 percent, according to Morningstar.
Another reason hedge-like mutual funds appeal to investors is they don't charge a performance commission, Cunningham said. Hedge funds generally charge 20 percent on positive returns, while hedge-like mutual funds generally charge a 2 percent fee on the amount invested.