Given market conditions in the last five years, the demand for retail alternatives is not difficult to understand. It appears that individual investors are moving to absolute-return investing and embracing alternative strategies for the same reasons institutional investors have: they need to tamp down volatility, hedge against major downturns and bridge the gap between actual and targeted returns.

According to aCerulli report, 90% of asset managers are looking to develop four or more alternative mutual funds over the next 12 months, perhaps because the retail market offers private fund managers the chance to diversify their revenue streams, earn more consistent fees and market their capabilities with fewer restrictions. While private fund managers can think of the retail market as another spoke to their distribution networks, the move into the retail space can be a big leap - one that requires a substantial commitment of time and resources.

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