Journal of Finance and Economics

Journal of Finance and Economics

ISSN: 2291-4951 (Print)    ISSN: 2291-496X (Online)

Volume 2 (2014), No. 4, Pages 68-77

DOI: 10.12735/jfe.v2i4p68

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The Characteristics of Alternative Mutual Funds

Zakri Bello1 

1Finance Department, Central Connecticut State University, USA

URL: https://doi.org/10.12735/jfe.v2i4p68

To Cite this Article     Article Views: 864     Downloads: 423  Since January, 2015

Abstract

This study investigated the portfolio characteristics and investment performance of alternative mutual funds from April 1993 to March 2013, focusing on Bear Market mutual funds, Market Neutral mutual funds, and a sampling of traditional stock mutual funds. The results indicate that alternative mutual funds are, on average, younger and smaller in size than the average traditional fund. Alternative funds, however, have significantly larger expense ratios, larger portfolio turnover, and fewer portfolio holdings. Bear Market fund returns generally move in the opposite direction of the stock market, whereas Market Neutral funds and the average traditional fund returns rise and fall with the stock market. The two categories of alternative funds underperformed the traditional funds, with substantially greater variability of returns and larger tracking errors. Furthermore, Bear Market funds had a negative beta and were more volatile than the stock market, whereas Market Neutral funds had a near-zero beta, making them less volatile than the stock market. The performance of the average traditional fund was not significantly different from zero, and its beta did not differ significantly from unity.

JEL Classifications: G11, G12, G23

Keywords: alternative mutual funds, hedge funds, bear market funds, market neutral funds, investment performance

To Cite this Article: Bello, Z. (2014). The characteristics of alternative mutual funds. Journal of Finance and Economics, 2(4), 68-77. https://doi.org/10.12735/jfe.v2i4p68

Copyright © Zakri Bello

Creative Commons License
This article is published under license to Science and Education Centre of North America. This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License.

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The Characteristics of Alternative Mutual Funds
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