Practical Applications of Is Alternative Investment a Successful Strategy?

In Is Alternative Investment a Successful Strategy?, from the Fall 2023 issue of The Journal of Alternative Investments, D. K. Malhotra of Thomas Jefferson University finds that alternative mutual funds (AMFs) outperformed US and global equity markets on a risk-adjusted basis from January 2000 to June 2022, but that AMFs have underperformed the US market since July 2007. During the COVID-19 pandemic, US equities outperformed AMFs in terms of both absolute returns and risk-adjusted returns. At the same time, AMFs became highly correlated with equities. Using a host of multifactor models, Malhotra failed to find statistically significant alphas for the AMFs. Furthermore, he found evidence that AMF managers have poor ability to time the market.