Investors have been pouring money into alternative mutual funds and ETFs in recent years, with assets soaring to $280billion in April from about $80 billion at the end of 2007.
This trend may be attributed to modern portfolio theory, which states that risk-adjusted returns can be enhanced by adding asset classes that have low or negative correlations to the rest of a portfolio. That means alternative funds in a client's portfolio should zig when her traditional stocks and bonds zag.
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