Understanding liquid alternatives in a Canadian portfolio

What “liquid alternative” means under Canadian securities rules, how these funds differ from conventional mutual funds, and the questions investors and advisors may wish to ask. This is a sample article layout for the redesigned Insights section.

What is a liquid alternative?

In Canada, “liquid alternatives” are alternative mutual funds offered by prospectus. They can use certain strategies not available to conventional mutual funds — such as shorting beyond conventional limits and greater use of derivatives or leverage — while retaining familiar features: daily purchases and redemptions, standardized disclosure through Fund Facts, and eligibility for registered plans.

Two Oak Hill funds are structured this way: the Oak Hill AQR Delphi Long-Short Equity Fund and the Oak Hill NexPoint Global Merger Arbitrage Fund.

Why investors consider them

Alternative strategies may diversify the sources of return in a portfolio, may help manage overall portfolio risk, and can provide access to approaches historically available mainly to institutions. Their value depends on the specific strategy, its costs, and how it fits alongside an investor’s other holdings.

Alternatives are not a single asset class — they are a set of tools. The right question is not “should I own alternatives?” but “what job would this strategy do in my portfolio?”

What to weigh carefully

Liquid alternatives carry their own risks and costs. Strategies may underperform in certain environments, shorting and derivatives introduce distinct exposures, and fees — including any performance fees — affect returns. Returns are not guaranteed, and these funds are not suitable for every investor. The fund’s simplified prospectus and Fund Facts describe the specific risks.

Investors should discuss suitability with their financial advisor before investing.

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. Commissions, trailing commissions, management fees and expenses all may be associated with investment funds. Investors should carefully consider a fund’s investment objectives and strategies, risks, fees and expenses before investing. Please read the offering documents before investing. Investment funds are not guaranteed. Fund values change frequently and past performance may not be repeated.