Roughly 40 funds occupy the alternative ETF space, and they provide two broad categories of product: absolute return funds and tactical funds giving access to unique patterns of returns, such as volatility-focused products.

Alternatives are used for two primary objectives. First, they can be used to reduce volatility and manage risk in investment portfolios. They can provide diversification to reduce overall portfolio risk or to help hedge against declines in equities or bonds. Second, they can enhance returns by investing in unique asset classes.