The idea with Alternative fund investing is to gain exposure to assets which are not highly correlated with the rest of your portfolio, and which use non-traditional approaches to fund management.
Alternative Funds are mutual funds that invest in non-traditional asset classes such as commodities (gold, silver, oil, etc.), agricultural products (cocoa futures, orange futures, pork-belly futures), non-publicly traded companies and limited partnerships, and so on.
For more information on futures, see “What are Futures Contracts?”
This can give the investor increased diversification in his or her portfolio, or allow the investor to gain exposure to asset classes that are not easily accessible otherwise. A popular example is REIT funds, which allow someone to invest in high-yield real estate without the startup capital required for buying actual real estate.
Alternative funds may also offer investment strategies that were previously only found in hedge funds, such as opportunistic shorting, or they may actually shadow the movements of large hedge funds.
What are Some Strategies for Diversifying a Portfolio?
Do I Need a more Specialized Financial Advisor?
What are Asset Classes?