Morningstar Advisor - December 2010/January 2011 - (Page 59)

Gray Matters All Aboard! By Timothy Galbraith As investors search past hedge funds for more-liquid offerings, the menu of alternative mutual funds expands to the bond world. Alternative investing has changed dramatically since late 2008: In Morningstar’s hedge fund database, hedge funds have netted outflows since 2008, but alternative mutual funds have seen exponential growth. Flows in 2010 through August surpassed 2009’s record amount. The only other mutual fund categories that have seen such explosive growth are in fixed income (from investors seeking capital protection). It’s no secret why investors have looked beyond hedge funds and moved toward alternative mutual funds. In the fall of 2008, many hedge fund investors in need of liquidity were prevented from gaining access to their own assets through provisions known as “gates.” An astonishing 56% of the largest 25 hedge fund firms engaged in some form of suspension, side-pocketing, or “stressed actions” to manage through the sudden investor demand for capital withdrawals at the end of 2008.1 At the same time, Bernie Madoff revealed the world’s largest Ponzi scheme, made possible by lack of regulation and neglectful hedge fund managers. 1 “Hedge Fund Update—Down but Not Out,” January 2009, Barclays Capital Prime Services/Asset Management Solutions Group presentation. 59

Table of Contents for the Digital Edition of Morningstar Advisor - December 2010/January 2011

Morningstar Advisor - December 2010/january 2011
New on
Letter From the Editor
What Strategies Do You Use to Help Retirees Hedge Against Longevity Risk?
Investment Briefs
Four Picks for the Present
Scaring the Swiss
Tech Is the Apple of Managers’ Eyes
How to Read an Sec Filing
A Strategy That Loves Performance Chasers
Things Fall Apart, Even in Industrials
A Future in Questions, Not Answers
Research Over Chocolates
Creating Portfolios That Confront Retirement’s Risks
Building in-Retirement Portfolios to Last
On the Lookout for Guaranteed Income Streams
What Fires Up Mairs & Power
All Aboard!
Aiming at Alternatives
Stuff Your Stocking with Out-of-Favor Bargains
Stable, High Yields (No Bonds Included)
Mutural Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks with Wide Moats
Twelve Bee, Huh?

Morningstar Advisor - December 2010/January 2011