The world of communications in the mutual fund industry is rife with buzzwords and phrases. They come in and out of favor as funds and fund managers seek to gain competitive advantage by repositioning an asset class or investment strategy as "the next big thing."

In recent years, alternative investments have become the hot commodity and "alternatives" has emerged as the buzzword of the hour. However, as more alternative investment products reach the marketplace and investors allocate more assets toward them, the name alternative is rapidly becoming a misnomer.

The word alternative connotes something different. Investors do not want to feel left out as markets evolve and everyone else seems to utilize alternatives as a way to adapt to a new investment landscape. The attitude about alternatives is reminiscent of the late 1990s when every business felt they had to have a website.

Never mind if they didn't have anything to say or sell on it. The attitude was, "Everybody else has a website, we better get one too, or we'll be left behind." In essence, mutual fund firms have fallen into the same mentality of "keeping up with the Joneses."

The allure of alternatives is easy to understand.

After surviving the intense market volatility of 2007 and 2008, investors were hungry for new strategies that could help reduce risk and provide returns in any market environment, so they poured money into anything they thought would help them weather the market swings-including hedge funds, private equity, precious metals and managed futures funds. These sophisticated strategies had previously only been available to the wealthiest of investors and the largest institutions, but that's no longer the case.

Not all alternatives are created equal. The justification for investing in alternative assets-that they reduce risk by providing greater diversification-is but one reason investors give for pursuing these strategies. Certainly alternative "tactical" strategies, which seek to capitalize on current market conditions, help smooth out portfolio volatility through low- or non-correlation. But, investors are also looking at various alternative asset classes as a way to generate superior returns, regardless of the activity in the world financial market.

The average retail investor now has access to a wide range of alternative investment strategies inside of mutual fund packages. According to Morningstar, 35 mutual funds are pursuing managed futures strategies alone. At the end of 2011, worldwide investment in alternative strategies had reached $6.5 trillion.

A survey conducted at the annual Financial Planning Association Experience Conference in September found that 83% of financial advisors are already using some iteration of alternative investing, and that fewer than 25% of the advisors surveyed still rely strictly on a traditional 60/40 stock/bond allocation.

All of those factors would seem to indicate that the demand for what we've called alternative investments is greater than ever, and allocations to strategies once considered alternatives are, in fact, becoming standard investment allocations. Industry estimates conclude that by 2015, alternative investments are expected to account for 25% of revenue and a majority of revenue growth of retail investor portfolios. Those trends would indicate a clear shift from alternative to mainstream.

So, now we've reached the point where, despite the growth of interest (and assets) in alternatives, we're still stuck defining them by what they are not (stocks, bond, nor cash) rather than what they are and that's just not going to cut it anymore. If funds expect investors to embrace their offerings, they first have to explain what the product is an alternative to, what kinds of protections it offers and the level of risk that the investor is assuming. The next challenge for alternative investment funds and fund managers will be clearly explaining how their strategies differ, not just from similar offerings, as when comparing hedge funds to hedge funds, but how they differ from the entire investing universe.

Investors are hungry for this information. Since alternative investments started gaining popularity, investors have been told to do their due diligence and educate themselves about the strategies behind the products.

In short, investors are not looking for eye-catching packaging. They are trying to understand the solutions they're considering, the logic behind their allocations and the role each asset plays in their overall portfolio, but they can't do it alone.

The passage and enactment of the Jumpstart Our Business Startups, or JOBS Act has greatly reduced the restrictions on hedge funds, private equity funds, venture capitalists and others that utilize private capital markets regarding general advertising and solicitation. This landmark legislation provides mutual fund firms with a tremendous opportunity to educate current and potential clients on how these alternative strategies work and what they can do for them. Companies that create, sell or manage these products must focus on communicating their value to investors by understanding the niche that their strategy fills in a portfolio and effectively feeding the growing appetite for education around their product and the factors influencing its performance.

In order to maximize their effectiveness, alternative investments need to redefine themselves as viable answers for investors today and into the future-not just as the alternative to lackluster performance of stocks and bonds. Remember, everything is an alternative to something. Make sure investors know just what alternative a fund provides.

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