Liquid alts are best described to clients as “a bond substitute” or an “equity substitute,” Bill Miller says.

Financial advisors looking to use liquid alternatives to enhance their clients’ portfolios are in very good hands: Those who work in the space are committed to putting together the very best products and solutions possible by combing through various strategies with discipline, rigor and the right amount of due diligence, and today, there are a large number of options that advisors can choose from.

The liquid alternative space is large and diversified, and spans anything from commodities and natural resources, to real estate, managed futures and multi-strategy/multi-manager funds. But Bill Miller, chief investment officer of Brinker Capital, who spoke at a panel discussion on the role of liquid alts in portfolio construction at Envestnet’s 14th Annual Advisor Summit in Chicago, urges advisors to “keep it simple” and not get bogged down in the technical details and jargon associated with these products when presenting them to clients. While advisors should certainly understand what liquid alternatives are and how they work, they’re best described to clients as “a bond substitute” or an “equity substitute,” he says.

And in the most basic way, they are, since the purpose of liquid alts is to provide noncorrelated returns to an investment portfolio and thereby improve its outcomes.

In 2013, the liquid alternative industry grew by 43.9%, says James St. Aubin, managing director at Wilshire Funds Management, and it’s slated to grow even further as interest in this space continues to increase. Multi-alternative, multi-strategy and multi-manager funds are among the most sought-after liquid alts, he says, and he’s expecting continued growth in this area.

St. Aubin, like others on the packaging end of liquid alternative strategies, believes in the importance of due diligence, manager selection, and a deep understanding of individual strategies, in order to present advisors and their clients with the best options.

That means that advisors, even as they’re learning to better understand liquid alts, should “outsource” to the providers in matters of strategy and manger selection. But they should also be well aware of their clients’ risk appetite as they’re getting them to understand that liquid alternatives bring greater diversification to their portfolios, St Aubin says, and that they will add the most value when used defensively.

According to Dorothy Collins Weaver, CEO of Collins Capital, liquid alts should only be used as noncorrelated diversifiers — as “the third leg [of the stool] that you want to be there when you need it.”

This is what advisors and their clients should be focusing on, she says, and in order to support that, Collins and her peers are focused on the tortoises rather than the hares, she says, on finding talented managers in the large, liquid alternative space who can perform in all markets but in particular, are able to “zig” when the markets “zag.”