Learning from the U.S. experience in liquid alts
While liquid alternatives (“liquid alts”) are new to Canada, they’re already a mature market in the U.S. And Canada can learn a lot from the introduction of liquid alts in the U.S. marketplace.
Launches, launches and more launches
Going into 2019, dozens of liquid alts had already been launched in Canada. We believe liquid alt launches will continue to snowball in 2019 and 2020. Some firms will be more methodical and launch one liquid alt solution at a time. Other companies will launch entire suites of liquid alts and see what resonates with advisors and investors.
One of the many interesting things to watch for will be the strategies that are most favoured by investors. Long-short equity, market neutral and non-traditional bond funds have been successful in the U.S. It’s likely that one of these will stand out from a sales perspective in Canada as well.
Another unknown is whether mutual fund or exchange-traded fund (“ETF”) versions of liquid alts will be more popular. The answer might simply come down to accessibility for advisors.
Education
Although this is a newer investment type and there is still a lot of uncertainty about liquid alts, many companies are going to launch liquid alt mutual funds and ETFs before they have educational content ready – and this could cause some problems.
Why? Because advisors and investors may not fully understand these new solutions, and getting people to review content after they’ve already started selling/buying liquid alts might be difficult. But educational content is – and has always been – key in successfully understanding the features, benefits, risks, etc. inherent in any investment solution.
We believe the best advice for any firm planning to launch liquid alt strategies is to get your content – specifically content geared toward educating investors and providing value to advisors – ready before your launch. This might be a challenge, but ext. can help.