About five years ago, alternative mutual funds – aka “liquidalternatives” – exploded onto the investment stage.

For a time, the genre’s hottest category was multialternative,which grew from a new Morningstar category in 2011 to about 500funds currently.

Read: The original alternativefunds

The multialternative category comprises a variety of activelymanaged investment styles including global macro, multistrategy,strategic allocation, tactical allocation, and hedge fundreplication.

What they have in common is the portfolio manager’s ability toaggressively mix asset classes – which can include high yield andemerging market bonds, commodities and currencies – in search oftimely opportunities and superior returns. (See Morningstar’s category description.)

Unfortunately, the category has not yet lived up to itspotential.

For the three-years ending 4/21/16, Morningstar’smultialternative category returned an annualized 0.98 percent, wellbelow the performance of all U.S. equity fund categories.

Read: Weak asset flows mark 2015

The category’s five-year annualized five-year performance was1.55 percent, also below all U.S. equity fund categories. The pastyear has given multialternative funds a chance to prove theirdown-market mettle, but here, too, results were unimpressive – acategory return of -4.96 percent, compared to -1.18 percent forLarge Blend U.S. equities.

For all of these periods, multialternatives also underperformedMorningstar’s other large liquid-alternative category, Long/ShortEquity.

Alternative mutual funds held total assets of $206 billionthrough the end of 2015, and their growth has been driven largelyby financial advisors who believed in new categories likemultialternative. Now, the space is littered with hundreds ofrelatively new and small multialternative funds with poor trackrecords.

It will be difficult for many to claw out of the performancehole. If they don’t survive, financial advisors will be left tryingto explain to clients what went wrong.

Actually, most of what went wrong might have beenanticipated.

First, there are periods in which most active managers struggleto beat passive benchmarks, and the environment of the last fewyears, dominated by central bank influence, has been one ofthem.

Secondly, the performance of multialternatives has been hurtover time by high expense ratios and portfolio turnover, whichaverage 1.65 percent and 208 percent, respectively, according toMorningstar.

Third, many managers of these funds did not have long tenuresworking in the same strategy. Morningstar lists only twomultialternative funds with 10 years or more of manager tenure and10 funds with five years or more of manager tenure.

Finally, asset size matters. Although there are hundreds ofmultialternative funds with less than $100 million in assets, onlytwo of them are Morningstar five-star funds.

It’s important for advisors to consider a new mutual fundcategory’s track record. Then, it’s a good idea to screen thecategory for funds meeting manager tenure, cost-efficiency, andasset size thresholds.

If you search Morningstar’s data base for multialternative fundswith five years or more of manager tenure, five-year performancebetter than the S&P 500’s, a cost ratio below 1.50 percent, andassets of $500 million or more, you will be left with just twochoices, among about 500 funds.

In summary: Multialternatives have demonstratedwhy you should expect new fund categories to prove themselves overtime – before putting your reputation on the line behind them.