Incorporating Liquid Alternatives – Part Two
Did you know that in addition to the Traditional and Diversifier models we offer on the OPS platform, we also offer single-ticker liquid alternative strategies within our Diversifier mandate? Single-ticker strategies are a group of tactical and alternative managers that can be accessed within our UMA portfolios. In most cases, these specific investment strategies from these firms are unavailable to investors except in this form. The benefit of offering single-ticker options are multifaceted. First, each strategy is highly vetted by our Orion Due Diligence team, going through a thorough review of SEC filings, Orion customized questionnaires, and finally in-person interviews. Second, by going through the Orion platform advisors gain access to institutional share classes under their stated minimums which are typically the lowest expense ratio available. Third, the Orion Due Diligence team regularly monitors the progress of each offering and will make recommendations based upon insights or opportunities we find within the marketplace.
Nevertheless, liquid alternatives are not created equal and there are vast differences as to why an advisor would choose one category over the other. Below, I have given a brief description of liquid alternative category offerings and the single-ticker strategy options available on our platform.Orion Portfolio Solutions has reviewed thousands of available strategies and narrowed the list to these specific options to fulfill the mandate requirements.
Long-Short Equity
Long-short portfolios hold sizable stakes in both long and short positions in equities. Some funds may shift their exposure depending on their macro outlook or the opportunities they uncover through bottom-up research. Some funds may simply hedge long stock positions through exchange-traded funds or derivatives.
| Morningstar Category – Long-Short Equity | ||||||
| Fund Name | Ticker | OPS Benchmark | Expense Ratio | 3-Yr Perf | 5-Yr Perf | Fund AUM |
| AQR Long-Short Equity Fund I | QLEIX | Growth and Income | 1.28% | -9.38% | -0.36% | $442.0 M |
| Thornburg Long/Short Equity Fund I | THLSX | Growth and Income | 1.53% | -1.56% | $50.7 M | |
| 361 Global Long/Short Equity Fund I | AGAZX | Growth and Income | 1.47% | 1.93% | 4.12% | $746.9 M |
| S&P 500 TR USD | 12.28% | 14.14% | ||||
| Category Average | 1.35% | 2.57% | 4.14% | |||
Source: Morningstar Direct, as of 09/30/2020
Market Neutral
Market Neutral funds attempt to reduce systematic risk such as exposures to sectors, market-cap ranges, investment styles, currencies, and/or countries. They do this by matching short positions against long positions. These strategies are often managed as beta-neutral, dollar-neutral, or sector-neutral. They typically have low beta exposures (< 0.3 in absolute value) attempting to reduce systematic risk with an emphasis on selection dependent on their ability to short or buy long the correct securities.
| Morningstar Category – Market Neutral | ||||||
| Fund Name | Ticker | OPS Benchmark | Expense Ratio | 3-Yr Perf | 5-Yr Perf | Fund AUM |
| Calamos Market Neutral Income Fund I | CMNIX | Income and Growth | 0.83% | 4.30% | 4.71% | $10.2 B |
| The Merger Fund Institutional Class | MERIX | Conservative Income | 1.27% | 5.35% | 4.61% | $3.4 B |
| USTREAS T-Bill Auction Ave 3 Mon | 0.57% | 1.27% | ||||
| Category Average | 1.35% | -0.52% | 0.95% | |||
Source: Morningstar Direct, as of 09/30/2020
Multi-Alternative
Multi-Alternative funds offer exposure to different tactics that may change slightly over time in response to market movements. Funds in this category tactically allocate among alternative strategies and asset classes. The gross short exposure is greater than 20%.
| Morningstar Category – Multialternative | ||||||
| Fund Name | Ticker | OPS Benchmark | Expense Ratio | 3-Yr Perf | 5-Yr Perf | Fund AUM |
| Blackstone Alternative Multi-Strategy Fund I | BXMIX | Income and Growth | 2.38% | -0.35% | 1.43% | $5.6 B |
| William Blair Macro Allocation Fund I | WMCIX | Income and Growth | 1.11% | -1.95% | -0.16% | $400.8 M |
| AQR Style Premia Alternative Fund I | QSPIX | Conservative Income | 1.55% | -11.74% | -5.69% | $995.4 M |
| Morningstar Mod Tgt Risk TR USD | 6.37% | 8.13% | ||||
| Category Average | 1.40% | 1.21% | 2.02% | |||
Source: Morningstar Direct, as of 09/30/2020
Managed Futures
Managed Futures funds primarily trade liquid global futures, options, swaps, and foreign exchange contracts. These funds follow trend-following, price-momentum strategies. Others are systematic mean reversion, discretionary global macro strategies, commodity index tracking, and other futures strategies. More than 60% of the fund’s exposure is invested through derivative securities.
| Morningstar Category – Managed Futures | ||||||
| Fund Name | Ticker | OPS Benchmark | Expense Ratio | 3-Yr Perf | 5-Yr Perf | Fund AUM |
| Abbey Capital Futures Strategy Fund I | ABYIX | Conservative Income | 1.79% | 3.32% | 0.07% | $884.6 M |
| AQR Managed Futures Strategy Fund I | AQMIX | Conservative Income | 1.23% | -1.59% | -4.49% | $3.3 B |
| Credit Suisse Mgd Futures Liquid TR USD | -3.44% | -2.86% | ||||
| Category Average | 1.55% | -0.27% | -1.36% | |||
Source: Morningstar Direct, as of 09/30/2020
Options Writing
Option Writing funds generate a significant portion of their returns from the collection of premiums on options contracts sold. This category includes covered call strategies, put writing strategies, as well as options strategies that target returns primarily from contract premiums. In addition, option writing funds may seek to generate a portion of their returns from the volatility risk premium associated with options trading strategies.
| Morningstar Category – Option Writing | ||||||
| Fund Name | Ticker | OPS Benchmark | Expense Ratio | 3-Yr Perf | 5-Yr Perf | Fund AUM |
| Main BuyWrite Fund Class I | BUYWX | Growth | 1.46% | -0.19% | $57.7 M | |
| CBOE S&P 500 BuyWrite BXM | 2.90% | |||||
| Category Average | 1.35% | 0.79% | ||||
Source: Morningstar Direct, as of 09/30/2020
MultiSector Bond
Multisector-Bond portfolios seek income by diversifying their assets among several fixed income sectors, usually U.S. government obligations, U.S. corporate bonds, foreign bonds, and high-yield U.S. debt securities. These portfolios typically hold 35% to 65% of bond assets in securities that are not rated or are at the level of BB (considered speculative for taxable bonds) and below.
| Morningstar Category – Mutlisector Bond | ||||||
| Fund Name | Ticker | OPS Benchmark | Expense Ratio | 3-Yr Perf | 5-Yr Perf | Fund AUM |
| Pimco Income Fund Institutional Class | PIMIX | Income and Growth | 0.50% | 3.63% | 5.49% | $125.2 B |
| BBgBarc US Universal TR USD | 5.15% | 4.49% | ||||
| Category Average | 0.67% | 3.09% | 4.34% | |||
Source: Morningstar Direct, as of 09/30/2020
World Bond
World-Bond portfolios invest 40% or more of their assets in foreign bonds. Some follow a conservative approach, favoring high-quality bonds from developed markets. Others are more adventurous and own lower-quality bonds from developed or emerging markets. Some portfolios invest exclusively outside the U.S., while others regularly invest in both U.S. and non-U.S. bonds.
| Morningstar Category – World Bond | ||||||
| Fund Name | Ticker | OPS Benchmark | Expense Ratio | 3-Yr Perf | 5-Yr Perf | Fund AUM |
| BrandywineGLOBAL – Global Opportunities Bond Fund I | GOBIX | Growth and Income | 0.68% | 1.68% | 4.45% | $2.1 B |
| BBgBarc Global Aggregate TR USD | 2.63% | 3.58% | ||||
| Category Average | 0.63% | -0.74% | 3.93% | |||
Source: Morningstar Direct, as of 09/30/2020
Nontraditional Bond
The Nontraditional Bond describes themselves as “absolute return” portfolios, which seek to avoid losses and produce returns uncorrelated with the overall bond market. Another large subset is self-described “unconstrained” portfolios that have more flexibility to invest tactically across a wide range of individual sectors, including high-yield and foreign debt. They typically have broad freedom to manage interest-rate sensitivity that attempts to minimize volatility by maintaining short or ultra-short duration portfolios but allocate significantly to credit and foreign bond markets to generate income. They will use credit default swaps and other fixed-income derivatives.
| Morningstar Category – Nontraditional Bond | ||||||
| Fund Name | Ticker | OPS Benchmark | Expense Ratio | 3-Yr Perf | 5-Yr Perf | Fund AUM |
| BrandywineGLOBAL – Global Unconstrained Bond Fund I | LROIX | Income and Growth | 0.85% | 0.28% | 2.81% | $748.1 M |
| Loomis Sayles Strategic Alpha Fund Y | LASYX | Income and Growth | 0.74% | 3.40% | 3.75% | $1.2 B |
| ICE BofA USD 3M Dep OR CM TR USD | 1.99% | 1.50% | ||||
| Category Average | 0.77% | 1.77% | 2.99% | |||
Source: Morningstar Direct, as of 09/30/2020
Precious Metals Equities
Precious metals portfolios focus on mining stocks, though some do own small amounts of gold bullion. Most portfolios concentrate on gold-mining stocks, but some have significant exposure to silver-, platinum-, and base-metal-mining stocks as well. Precious-metals companies are typically based in North America, Australia, or South Africa.
| Morningstar Category – Equity Precious Metals | ||||||
| Fund Name | Ticker | OPS Benchmark | Expense Ratio | 3-Yr Perf | 5-Yr Perf | Fund AUM |
| Fidelity Select Gold Portfolio | FSAGX | Aggressive Growth | 0.79% | 16.54% | 20.47% | $2.5 B |
| MSCI World/Metals & Mining NR USD | 7.42% | 16.23% | ||||
| Category Average | 1.02% | 14.85% | 20.93% | |||
Source: Morningstar Direct, as of 09/30/2020
To learn more about our single-ticker liquid alternative offerings, contact your Regional Sales Team at 800.379.2513, option 1.
The CFA® is a globally respected, graduate-level investment credential established in 1962 and awarded by CFA Institute — the largest global association of investment professionals. To learn more about the CFA charter, visit www.cfainstitute.org.
The CAIA® is the globally-recognized credential for professionals managing, analyzing, distributing, or regulating alternative investments. To learn more about the CAIA, visit https://caia.org/.
The CFP ® designation is a professional certification for financial planners conferred by the CFP Board. CFP® professionals have completed extensive training and experience requirements and are held to rigorous ethical standards, while understanding the complexities of the changing financial climate, and know how to make recommendations in their clients best interest. To learn more about the CFP®, visit https://www.cfp.net/home.
2715-OPS-10/23/2020