Posted by Fundmentals on November 06, 2009 at 15:41:15:
The discussion below on the merger/arbitrage funds prompted me to post this list I found of someone who has done the research to list funds that have active/alternate investment strategies.
These are not the alternative investments that pension funds and endowments went chasing after (although in their case it was the non-liquidity of the asset classes they invested in that hurt them more than the invalidity of the investment strategies itself).
Such funds can play a part in a portfolio or part of a portfolio designed to optimize risk-managed returns with downside protection which usually means that they will lag in bull markets but preserve capital in bear markets. When properly diversified with a traditional asset allocation portfolio, they can provide stability and downside protection while not being constrained to diversified-bond like returns. It is important to diversify amongst them so you are not overexposed to strategy risks and idiosyncratic manger risks.
I have not looked at all the funds in this list so am not making recommendations for/against any specific fund there with this list.