Despite Marketfield Outflows, Liquid Alt Flows Positive In November

In a reversal from October when outflows from the MainStay Marketfield Fund dwarfed inflows into other liquid alternative funds and categories, the broader liquid alternatives category squeaked out positive inflows for November. In total, Morningstar’s Alternative category generated $254 million in net inflows, against a headwind of $1.6 billion of outflows from the MainStay Marketfield Fund. Breaking this down between active and passive funds, as shown in the table below, active funds had an outflow of $59 million while passive alternative funds had inflows of $313, primarily driven by inflows to trading strategies such as leveraged and inverse ETFs.

Morningstar Asset Flows November 2014

The MainStay Marketfield Fund again experienced significant outflows for the month to the tune of $1.6 billion as noted above, bringing the 1-year total to $4.3 billion and the month end assets down to $11.9 billion from $18.1 billion one year ago. These outflows in November place the fund #3 on the list of active funds with net outflows, as seen in the chart below:

Morningstar November Flows Top Outflow Funds

 Category Breakdown

Long/short equity funds had the largest outflows as a category, but removing the $1.6 billion of outflows from Marketfield would leave the category in healthy, positive territory. Multi-Alternative funds continued to gather assets at a strong pace as funds in this category remain a single allocation to alternatives for many advisors and other investors.

A breakdown of November flows by alternative category is below:

Liquid Alternative Flows November 2014

Two additional categories often considered alternative categories, but not classified as such by Morningstar, are non-traditional bonds and commodities, both of which are covered below.

Non-Traditional Bonds

Flows to the non-tradititional bond category returned to positive territory after experiencing $1.3 billion in outflows in October. Year to date, the category has experienced positive inflows of $24.7 billion, with positive net flows of $918 million in November. This all helps mitigate the total outflows from the taxable bond category, which are $5.3 billion year to date.

Returns for the category in November were -0.89%, bringing the total return for the year to date period to 0.17%. This compares to the intermediate term bond category, which is where traditional core bond products are categorized, which was up 1.16% in November and 10.96% year to date. The much unexpected rally in bonds this year has clearly benefited the traditional core bond products, while many of the non-traditional products, which generally have lower or even negative duration, have lagged. A decline in flows to the non-traditional category over the past two months may be an indication that investors are growing more impatient with their expectation of lower interest rates.

Commodities

Commodity funds continued to see net outflows in November with net outflows for the month hitting $255 million. This brings the year to date total to $5.3 billion, with the expectation that investors will continue to shy away from this category as both oil and gold prices decline on the back of muted economic growth and potential deflationary pressures in various economies around the world.

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