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Lower Duration, Mitigate Risk With Liquid Alternative Funds


Despite powerful rallies in both stock and bond indices, money keeps flowing into liquid alternative funds because investors are seeking to mitigate risk, said Jack Rivkin, CIO of Altegris. Rivkin said bond investors are using hedged funds to reduce duration and credit risk. He advocated selling short bonds with durations of 10 years or more. Meanwhile, on the long side, he said he is not worried about a bubble bursting in high yield because of the extended credit cycle. Finally, Rivkin said it depends on personal preference, but on average most investors have too low a proportion of their assets allocated to liquid alternative funds.