Will Alternative ETFs Break Out Of No Man’s Land?

By Andrew Beer, Dynamic Beta Investments A dozen years after the launch of the first alternative ETFs, not a single one has more than $1 billion in assets and only five have more than $100 million. While there are hundreds of alternative mutual funds, there are, at best, a few dozen alternative ETFs – a figure that is dropping with the announced closure of several products over the coming weeks. The inescapable conclusion is that the alternative ETF space, to date, has been a dismal failure. The existential question today is: Do alternative ETFs have a future? In this article, I make the argument that the answer is yes: in fact, alternative ETFs have a surprisingly bright future. That said, I also argue that responsibility for the lack of traction lies at the feet of product developers: the current universe of ETFs, by and large, is ill-suited to the needs of the most important investors. I will then pivot to how we believe the space should evolve and what is likely to drive widespread adoption. For purposes of this article, “alternative ETF” is defined as long/short hedge fund strategies like managed futures and equity long/short, not long- or short-only products in commodities or other areas.