In the context of mutual investing, what are “alternative funds”?

Alternative funds are designed to provide investors with access to a range of unconventional strategies and asset classes beyond traditional stock and bond investments. These funds often employ diverse investment techniques and may invest in areas such as hedge funds, private equity, real estate, commodities, and distressed securities. The goal of alternative funds is to enhance portfolio diversification and potentially achieve higher returns, often with different risk and return profiles compared to conventional funds.

The types of strategies employed in alternative funds can include leveraging, short selling, and investing in illiquid or exotic assets, which contrasts sharply with the strategies used in traditional investment funds. This makes them appealing for investors looking to diversify their portfolios and reduce overall volatility.

This understanding distinguishes alternative funds from those that focus solely on stocks and bonds, utilize conventional investment strategies, or concentrate exclusively on cash equivalents, which do not provide the same range of investment opportunities or approaches.