(HedgeCo.Net). In an industry-wide shift, major players are actively promoting liquid alternatives as essential components of modern portfolios. One standout example is Morgan Stanley, which in November 2025 publicly reiterated its support for liquid alts as a “core diversification tool.” HedgeCo.Net

Historically, fixed income (bonds) held the diversification role in portfolios. But Morgan Stanley argues that correlation between equities and bonds has increased in recent years, undermining that hedge — a trend especially worrisome given compressed bond yields and elevated equity valuations. HedgeCo.Net+1

As a result, Morgan Stanley is heavily marketing alternative risk-premia (ARP) strategies — such as momentum, carry, and volatility — packaged into liquid-alt structures (mutual funds, ETFs). These strategies aim to replicate the diversified, hedge-fund-style returns but with daily liquidity and lower barriers to entry. HedgeCo.Net+1

Morgan Stanley’s promotion is not just theoretical. Through its Investment Management arm, it offers educational resources to advisors to help integrate liquid alts into client portfolios, reinforcing the view that these strategies are no longer fringe — but increasingly foundational. HedgeCo.Net

Takeaway: If large institutions like Morgan Stanley are leaning into liquid alts as central portfolio building blocks, it reflects growing confidence in the ability of these funds to deliver differentiated returns and reduce risk in a challenging market environment.