Bloomberg: Investors Rushing To Alternative Mutual Funds From JPMorgan (JPM) To Pimco
As always I appear to have been early to a trend ;) I really need to get going before the Fidelity's and Vanguard's flood the industry with these type of funds...
Via
Bloomberg:
- JPMorgan Chase & Co. and Pacific Investment Management Co. are inundated with money from individuals attempting to mimic the performance of hedge funds speculating that the stock-market rally is over.
- So-called bear-market and long-short mutual funds, designed to protect against falling stock prices, attracted a record $10 billion this year through October, more than double the previous high in 2006, according to Morningstar Inc.
- Asset managers have opened 19 long-short funds, the most in one year. Long-short funds buy stocks as well as sell them short. In a short transaction, the investor sells borrowed shares in a bet that the price will subsequently fall and the stock can be purchased and the loan repaid at a profit. These funds hold more long positions, or those that make money when prices rise, than shorts.
- Conventional mutual funds that only buy U.S. stocks posted $4.6 billion of redemptions in the first 10 months of the year, while bond funds added $280 billion.
- Most conventional mutual funds don't short stocks. (most investors think mutual fund "can't" short... not true at all, the industy is staid, fat, and happy to do what is easy - after all the same 10-12 families control the entire 401k market so why bother to take a 'risk'?)
- The best-seller among the funds is Hussman Strategic Growth, run by economist John Hussman of Ellicott City, Maryland. It drew $1.7 billion through September after limiting its loss last year to 9 percent, according to Morningstar, less than half the average of hedge funds. (Hussman, who has a very risk averse model, was also an Economics professor at the University of Michigan either while I was there, or right after - can't tell from his bio. It would be sort of funny if I took one of his courses... can't remember, at worst crossed paths within a year or two of each other)
- The $3.4 billion Highbridge Statistical Market Neutral Fund, run by JPMorgan's Highbridge Capital Management LLC, pulled in $1.5 billion. At Pimco, the world's largest bond manager, Bill Gross's Fundamental Advantage Total Return Fund raked in $786 million, Morningstar's data show. (these numbers are simply staggering)
- The alternative funds have been around since at least 1977 and had sales increases after the dot-com bubble burst in 2000.
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