(Bloomberg) -- The managers of the MainStay Marketfield Fund are learning how quickly investors can abandon alternative strategies when performance sours.

MainStay Marketfield was supplanted as the largest alternative mutual fund after assets dropped to $7.3 billion as of Feb. 28 from more than $21 billion a year earlier, according to Morningstar. The $8.1 billion Gateway Fund now holds the distinction.

Investors poured money into the long-short MainStay Marketfield in 2013 after manager Michael Aronstein consistently beat peers from 2008 to 2012. Many pulled their money after he lost 12% last year, trailing 97% of peers. The Standard & Poor’s 500 Index returned 14% last year, including reinvested dividends.

“Hot money is always very fickle,” said Josh Charney, a Morningstar analyst.

Aronstein, a 61-year-old Yale University graduate, and Michael Shaoul, the chief executive officer of New York-based Marketfield Asset Management, comb data ranging from the Federal Reserve’s balance sheet to Brazil’s consumer loans to China’s auto sales looking for turning points in economic behavior and then invest for the reversal of the trend.

The fund, owned by New York Life Insurance Co. and named for a street used as a Manhattan livestock market in the 17th century, lost 12% in 2008 compared with the 37% decline of the S&P 500, according to data compiled by Bloomberg.

In 2014, it stumbled on a series of bad bets, Charney said. “They were just wrong,” he said.

INFLATION BET

The managers invested in raw material stocks on the assumption that an increase in inflation was imminent, Charney said. They also bet against companies that stood to lose from higher prices for goods and services. Inflation instead remained low in 2014, with the consumer price index rising 1.6% and commodity prices tumbling.

MainStay Marketfield also cut its exposure to the stock market in September, missing an October rally, Charney said.

Allison Scott, a spokeswoman for MainStay, said the fund’s positioning “has helped it weather volatility” in 2015. The fund has lost 1.1% this year, trailing 90% of rivals, according to data compiled by Bloomberg.

“We have every confidence in the Marketfield team and their investment process going forward, and caution investors to consider a fund’s long term results in making their buy-sell decisions rather than reacting to short term trends,” she said in an e-mailed statement.

GATEWAY FUND

Many alternative mutual funds were created after the 2008 financial crisis as investors sought returns not correlated with the stock market. They offer strategies traditionally used by hedge funds to limit losses in down markets, such as betting against stocks through short sales or investing in non- traditional assets including leveraged loans, commodities and currencies.

Alternative funds had $199 billion in assets as of Dec. 31, Morningstar data show.

The Gateway Fund attempts to damp volatility by using index options, according to the fund’s website. The strategy has the potential for “less downside exposure,” Gateway wrote.

A spokesman for the fund didn’t immediately respond to a request for comment.

  

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.