Forbes – In concept, liquid alternative are alternative investments such as hedge funds and private equity funds that are available to any investor. Whereas traditional alternative investments can only be purchased by accredited investors (i.e., people with a net worth of $1 million or more not including their primary residence, or have an annual income of $200,000 or more), liquid alternatives are open to anyone. They often do not require large investments as many traditional alternatives do.
Bill McBride, executive vice president at quantitative research and technology specialist Markov Processes International (MPI), highlights the asset level minimum typically required to build a diversified portfolio of hedge funds: “To achieve a sufficiently diversified pool of strategies, an investor would likely invest in 15 to 20 hedge funds. If investing directly, a good portfolio of hedge funds would require a $15 million to $20 million total initial investment as investment minimums for most quality managers are typically no less than $1 million. Liquid alts allow advisors to create customized diversified portfolios of hedge fund strategies for investors whose net worth and/or income previously precluded them from gaining access to the uncorrelated returns streams and diversification that hedge funds have represented.”
