4 Funds That Go Beyond Stocks and Bonds

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Some of the world’s best investors run private equity firms like Blackstone (NYSE:BX), KKR (NYSE:KKR) and Apollo Global Management (NYSE:APO). To generate high returns, they often focus on so-called alternative investments — which go beyond just focusing on plain-vanilla stocks and bonds.

Instead, private equity firms will invest in commodities, real estate and private businesses. They also will engage in sophisticated strategies, such as short selling.

For individual investors, it is not easy to get exposure to alternative investments — often, you need to be fairly wealthy to participate in the funds. But there’s at least a few available mutual funds you can tap for some exotic flavor. True, some of these funds still have some equities in their portfolio, but the stocks are unique companies that have a chance at performing independently of the general market.

Here’s a look:

First Eagle Gold

For centuries, gold has represented a safe haven. In times of crisis or inflation, investors will buy up the precious metal to preserve capital. Let’s face it: Governments can print money, but they can’t print gold. Meanwhile, it has become harder for miners to find new sources for gold. Companies like like Barrick Gold (NYSE:ABX) and Newmont Mining (NYSE:NEM) have had difficulties increasing their reserves. This limitation on supply should help keep a floor on the price of gold.

Investors looking to put some gold into their portfolios — through a mutual fund — should look at the First Eagle Gold Fund (MUTF:SGGDX).

It’s important to realize that many “gold” funds actually have exposure to other commodities like copper, silver and aluminum. But First Eagle’s focus is heavily toward gold. More than 15% of the portfolio is invested in bullion, and SGGDX also holds substantial positions in miners like Goldcorp (NYSE:GG) and AngloGold (NYSE:AU).

First Eagle has returned about 16% annually over the past three years, and expenses run at a low 1.2%.

Credit Suisse Commodity Return Strategy

During the past decade, commodities have been a strong growth sector. A driving force has been the emergence of the BRIC countries, which include Brazil, Russia, India and China. They have undergone aggressive industrialization, which has required substantial amounts of commodities.

But even as the BRICs’ growth begins to slow, the future still looks bright. Other countries across Asia, South America and even Africa are seeing the benefits of capitalism, and the result is likely to be even more demand for commodities.

One way to play this trend is with the Credit Suisse Commodity Return Strategy (MUTF:CRSOX) fund, which does not invest in stocks. Rather, it focuses on futures, which are complex contracts that allow investors to bet on the direction of the prices on commodities.

Credit Suisse Commodity Return Strategy has a comprehensive approach, with exposure to categories including agriculture, energy, industrial metals, precious metals and livestock.

What’s more, the fund has a reasonable expense ratio of 0.79%. The performance can be volatile; however, over the past three years, CRSOX still has managed an average return of 7.24%.

CGM Realty

Real estate investment trusts, or REITs, are a common way to play real estate. They’re also income-hunter favorites because REITs are required to pay out 90% of all taxable income to investors.

A variety of mutual funds invest in REITs, but one of the standouts is the CGM Realty Fund (MUTF:CGMRX).

The portfolio manager is Ken Heebner, who is one of Wall Street’s top investors. But he also is a quick trader, which can mean CGMRX can experience lots of volatility. Still, over the long haul, CGM Realty’s results have been impressive. For the past decade, CGMRX has posted an average return of 17.4%. CGMRX also sports a 0.88% expense ratio.

PIMCO StocksPLUS TR Short Strategy

Short selling is a way for investors to make money when an asset falls in value. It’s a risky strategy, but is fairly common among top-notch investors. Just look at hedge fund managers like John Paulson that made billions from the real estate bust in 2007 and 2008.

One fund that practices short selling strategies is PIMCO StocksPLUS TR Short Strategy (MUTF:PSSAX). The portfolio manager is none other than the “Bond King,” Bill Gross, who operates the world’s largest bond fund, PIMCO Total Return (MUTF:PTTAX).

The PIMCO StocksPLUS TR Short Strategy fund takes a short position on the the S&P 500 Index, providing an effective way to hedge a portfolio against a bear market. For example, during a crushing 2008, where the S&P 500 lost 41%, PSSAX was up a staggering 47.42%.

Of course, investors should be warned that when times are good, PSSAX is bad. This year, the fund is off by 5.5% vs. 10.6% gains in the S&P 500. PSSAX charges 1.06% in expenses.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”“All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.

Tom Taulli is the author of various books. They include Artificial Intelligence Basics and the Robotic Process Automation Handbook. His upcoming book is called Generative AI: How ChatGPT and other AI Tools Will Revolutionize Business.


Article printed from InvestorPlace Media, https://investorplace.com/2012/04/4-funds-that-go-beyond-stocks-and-bonds/.

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