Rick Lake of Lake Partners offers a concise history of liquid alternatives in this video, recorded at the Investing in Liquid Alternatives Conference in New York. He says that the evolution of liquid alts began with tax and regulatory changes in 1997, and that it has continued steadily since, ultimately encompassing nearly the entire universe of alternative investments.
Long/short equity funds were the first liquid alts, followed by event-driven and merger-arbitrage funds. In 2003, the first long/short bond fund was launched; and 2007 saw the arrival of the world’s first managed-futures mutual fund. Now managed futures have spawned into the global macro category, which can be sub-divided into discretionary, systematic, and other sub-strategies: But are more strategies and more products necessarily a good thing?
Perhaps not, but Mr. Lake welcomes the “democratization” of alternative investments and the “fascinating” migration of hedge fund managers to the space. There are plenty of good managers in most alternative categories, although Mr. Lake says global macro and especially global long/short equity could use some more, and that alternative strategies that invest in illiquid instruments or use a lot of leverage may not work well and could be left behind.
Click here for Part I of this video series. For a list of all the exclusive DailyAlts videos, click here.