Understanding Liquid Alternatives
Multi-Strategy Approaches
What Is a Multi-Strategy Approach?
Multi-Strategy liquid alternatives blend multiple alternative investment styles into a single portfolio. By combining strategies such as long-short equity, global macro, managed futures, arbitrage, and others, these approaches seek to deliver consistent returns with reduced risk through diversification.
Each component strategy contributes a different source of return, ideally with low correlation to both each other and to traditional equity or fixed income markets. This combination seeks to generate a more balanced return profile and enhanced risk-adjusted performance.
How It Works
Multi-strategy funds often use a mix of internal teams and external managers to execute distinct strategies under one structure.
- Strategy Diversification: Allocates across complementary alternative strategies.
- Dynamic Allocation: Managers adjust weightings based on market conditions.
- Risk Budgeting: Portfolio construction based on volatility, drawdown limits, and correlation controls.
Potential Benefits of Multi-Strategy Funds
- Diversification: May reduce concentration risk and strategy-specific drawdowns.
- Smoother Returns: Combines uncorrelated alpha sources to mitigate volatility.
- Adaptive: Flexibility to shift exposures as macro or market conditions evolve.
- Efficient Access: One allocation provides exposure to several differentiated return drivers.
Key Risks
- Complexity: Requires deep manager expertise in multiple disciplines.
- Cross-Strategy Correlation: In extreme markets, strategies may become correlated.
- Manager Dependence: Success hinges on asset allocation skill and oversight of individual components.
Multi-Strategy vs. Single-Strategy Approaches
Multi-strategy vehicles aim to deliver more stable and scalable alternative returns by combining the strengths of multiple individual strategies.
| Feature | Multi-Strategy | Single-Strategy |
|---|---|---|
| Return Drivers | Multiple alpha sources | One focused approach |
| Diversification | Higher | High |
| Risk Profile | Balanced, smoother | Strategy-dependent |
| Management | Single, diversified fund/manager | Separate, specialized funds/managers |
Source: AQR. For informational purposes only. The comparisons herein are not exhaustive and do not address all relevant features, risks, or considerations associated with the strategies discussed. Investors should conduct their own due diligence before making any investment decision.
Who Typically Uses Multi-Strategy Liquid Alts?
- Investors seeking broad exposure to alternative return streams.
- Portfolios looking for a core alternative allocation.
- Advisors seeking simplified access to sophisticated strategies.
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DISCLOSURES
Investors should carefully consider the investment objectives, risks, charges and expenses of the Funds before investing. To obtain a prospectus or summary prospectus containing this and other important information, please call 1-866-290-2688 or click here to view or download a prospectus online. Read the prospectus carefully before you invest.
The information contained on this website has been provided solely for information purposes and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such. The information on this site is directed only at persons or entities in any jurisdiction or country where such access to information contained on this website and use of such information is not contrary to local law or regulation. Accordingly, all persons who access this website are required to inform themselves of and to comply with any such restrictions. Past performance is not a guarantee of future performance.
There can be no assurance that an investment strategy will be successful. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment which may differ materially and should not be relied upon as such.
View definitions of benchmarks and other terms used here.
The investment strategy and themes discussed herein may not be in the best interest of investors depending on their specific investment objectives and financial situation.
Diversification does not eliminate the risk of experiencing investment losses. There is a risk of substantial loss associated with trading commodities, futures, options, derivatives and other financial instruments. Before trading, investors should carefully consider their financial position and risk tolerance to determine if the proposed trading style is appropriate. Investors should realize that when trading futures, commodities, options, derivatives and other financial instruments one could lose the full balance of their account. It is also possible to lose more than the initial deposit when trading derivatives or using leverage. All funds committed to such a trading strategy should be purely risk capital.
© AQR Funds are distributed by ALPS Distributors, Inc. AQR Capital Management, LLC is the Investment Manager of the Funds and a federally registered investment adviser. ALPS Distributors is not affiliated with AQR Capital Management.