Alternative multi-manager mutual funds (AMMF) seem to give investors the best of both worlds: all the advantages of a traditional mutual fund (daily liquidity, lower fees, lower minimum investments, regulatory oversight) with exposure to hedge funds and other alternatives (better diversification, alpha generation). But there has been a steady performance drag over the last few years that could be a systemic problem caused by adverse selection of managers and sub-advisors. AMMFs trail by about 200bps net fees “While it’s still very early in the game, our analysis indicates that AMMFs are likely to be subject to a persistent performance drag…