Alternative Investments for the Masses

Is it time for the average investor to look into alternative investments to the traditional balanced portfolio of stocks and bonds?

In a column in Thursday’s Globe & Mail Report on Business, I look at a relatively new mutual fund from Mackenzie Investments that gives both average and affluent investors a way to diversify their portfolios into alternative investments or asset classes.

You can find it by clicking on the highlighted headline: Alternative Investing for the Masses.

The Mackenzie Diversified Alternative Fund (“MDAF”) is positioned as a low-risk way to diversify beyond the typical “balanced” fund or balanced portfolio of stocks and bonds. As the article says, both traditional stocks and bonds appear pricey at this juncture, and studies show that putting up to 20% of a total portfolio can smooth returns. Indeed, many giant pension funds have far more than that, including such well known pensions as Ontario Teachers and OMERs.

Non-traditional asset classes seen as “alternatives” include private equity, infrastructure, emerging-market debt, limited partnerships and a host of other investments not easily accessed by the average investor. Pension funds can get their own direct access to alternatives but for individuals many were available only through “offering memorandums” available only to those considered sophisticated investors: with $1 million in investible assets or combined annual family income of $300,000.

Low entry point, liquid

By contrast, the Mackenzie fund can be purchased for as little as $500, like most mutual funds, and unlike many hedge funds, can be liquidated on demand like any other mutual fund.

The article goes into the fee issue: the A series has an Management Expense Ratio (MER) of 2.42% and the F series 1.25% (advisors will then tack on their own fee, typically another 1%). But affluent investors get a price break under the Mackenzie Private Wealth Solutions’ preferred-pricing program, with the basic management fee for household wealth in all Mackenzie funds tapering down from 0.8% to as little as 0.5% for $5 million dollar portfolios.


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