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Fund Spy

Putting Morningstar’s New Style Box to Work

Three ways investors can use the alternatives style box as part of their regular due diligence.

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In October, we introduced the Morningstar Style Box for alternative funds, a new framework for analyzing alternative mutual funds. The October Fund Spy outlined why we think investors need a convenient way to view the diversification characteristics of liquid alternative mutual funds and the methodology behind the alternatives style box. The article can be found here, but to quickly recap: The appeal of alternative funds lies in their ability to provide diversification to a traditional portfolio of stocks and bonds. The funds can achieve that by either having a low correlation to traditional asset classes or offering exposure to traditional asset classes with lower volatility. Investors lack a convenient way to quickly assess those characteristics, however, which is why Morningstar has developed the alternatives style box.

Jason Kephart does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.