A new report from investment research firm Morningstar and financial magazine Barron’s indicates that investors are beginning to substitute alternative mutual funds for hedge funds.
The fifth annual survey reveals that more financial advisors are incorporating alternative mutual funds, which are generally more liquid and transparent than their hedge fund counterparts, into their client portfolios. Mutual funds saw inflows of $19.7 billion in 2012, while about $7.6 billion flowed out of single-strategy hedge funds, according to funds listed on Morningstar’s database.
While 61% of respondents indicated that they invested in long/short strategies in 2010, only 26% said that they utilized the same strategy this year. In contrast, over 45% of respondents revealed that they access long/short strategies through mutual funds this year versus 38% in 2010.
Morningstar and Barron’s surveyed 235 institutional investors and 471 financial advisors for this year’s report.