Video: A Look Back at the Litman Gregory Alternatives Fund

The Litman Gregory Masters Alternatives Strategies Fund (MASNX) celebrated its third anniversary on September 30, and has delivered an annualized return of 6.67% since its inception. Year-to-date, the fund’s 2.77% gains beat the Morningstar category average by 174 basis points through November 17, ranking it in the top 28% of the 334 funds in Morningstar’s Multialternative category.

The Litman Gregory Masters Alternatives Strategies Fund, known as the “Litman Gregory Alts Fund” for short, uses a multi-manager, multi-strategy approach. The fund’s sub-advisors include Jeffrey Gundlach of DoubleLine Capital; a team from Loomis Sayles; Steven Romick of First Pacific Advisors; John Orrico of Water Island Capital; and Tim Garry and John Burbank of Passport Capital. Each of these accomplished managers offers insights on the fund in this recently produced video.

Litman Gregory co-founder Ken Gregory also appears in the video, explaining why he was initially motivated to launch a liquid alts fund. Essentially, Mr. Gregory was dissatisfied with all of the available liquid alts products, so he decided to launch his own. The features he was looking for, but found lacking in the funds that were available at the time, include:

  • Diversification benefits
  • Low correlation to traditional asset classes
  • Understandable investment approaches
  • Reasonable fees
  • A low level of absolute risk
  • “Decent returns,” which he defines in the “mid to high single digits”

Combining all of the above into a single liquid alts product is a tall order, so it’s not surprising Mr. Gregory was unimpressed with the available offerings in 2011.

The Litman Gregory Alts Fund utilizes the “best ideas” of each of its sub-advisors, who are empowered to pursue more aggressive strategies for the fund than with their own products. Since each of the Litman Gregory Alts Funds’ strategies have low or inverse correlation, the volatility of the different strategies may offset one another and provide smoother returns.

  • DoubleLine oversees the fund’s opportunistic income strategy;
  • Loomis Sayles manages the fund’s strategic alpha fixed-income strategy;
  • First Pacific Advisors manages the fund’s contrarian opportunity strategy;
  • Water Island pursues an arbitrage strategy for the fund; and
  • Passport Capital, the fund’s newest sub-advisor, manages a long/short equity portfolio.

As of this video’s publication, the Litman Gregory Alts Fund had an expense ratio of 1.49%, vs. the 1.98% average for the category. Its betas to equities and bonds were 0.24 and -0.13, respectively; and the fund had the highest three-year Sharp ratio of any Multialternative fund at 2.29%.

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Note: This post was updated in September 2015 with the updated video that is shown above.

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