New York (HedgeCo.net) – While the roaring bull market of the last six-plus years has caused some investors to question the allure of hedge funds, it appears it may be having the same impact on liquid alternatives.

A recent Bloomberg article showed that the flow of capital into liquid alternatives has slowed considerably in 2015 and are down to levels not seen since 2008. In 2014, liquid alts saw a net inflow of $39 billion and that was down from a record-breaking $96 billion in 2013.

According to the article, inflows for 2015 are a paltry $1.2 billion through the end of May.
It is a similar story to that of the hedge fund industry in that the stock market has done so well in recent years, hedge funds and liquid alts have underperformed traditional mutual funds or ETFs. But all of that could change when the market enters its next bearish phase.

In fact, the inflows and outflows of liquid alternative funds could be a new contrarian indicator. When retail investors don’t see the need for alternative investments and the hedging aspect they offer, it could be a sign that the market is overheated and is due for a decline.

Rick Pendergraft
Research Analyst
HedgeCoVest