Nearly 40% of U.S. Advisors Are Using Alternative Investments

Nearly 40% of U.S. Advisors Are Using Alternative Investments


September 2018, Boston. U.S. advisors’ mean allocations in 2017 to alternatives represented 7.2% of their total assets under management (AUM), compared to 5.7% the year prior, according to the new report, U.S. Alternative Investments 2018: Accessing Evolving Alternative Platforms, released by Cerulli Associates, a global research and consulting firm.

“This past year, the global alternative investments industry benefited from two main drivers,” states Michele Giuditta, director at Cerulli. “Strong economic growth across North America, Europe, and Asia, and the growing attraction institutional investors have for alternatives assets in these markets. Worldwide alternative assets were approaching $9 trillion as of year-end 2017. Private capital investments account for nearly $5 trillion of that AUM. Hedge funds and liquid alternatives rebounded after experiencing a tough year in 2016, when performance declined, and redemptions outpaced new allocations.”

“In terms of importance to overall distribution plans for alternative investment products, the retail advisor-sold (38%) and high-net-worth (37%) channels have become almost as equally as important as the institutional (40%) channel,” continues Giuditta. Asset managers are expected to focus increasingly on technology and product development to provide retail investors with greater access to alternatives.

“Advisors have played an increasingly important role in the spread and adoption of alternative investment products across different channels,” explains Giuditta. “Cerulli’s latest survey reveals that nearly 40% of advisors report using alternatives (excluding liquid alternatives) and just more than 37% report using liquid alternative mutual funds.” Use of alternatives is particularly strong within wirehouses (57%), hybrid registered investment advisors, or RIAs (43%), and retail bank broker/dealers (64%). RIAs continue to be the leading channel alternative asset managers target for their investment products.

The alternatives investment business continues to be highly dynamic in terms of its access to product structures. Cerulli’s research indicates that asset managers are using more accessible vehicles, such as master feeder funds, when packaging products for qualified retail investors. Nearly 50% of managers are using this vehicle and 41% expect feeder funds to remain a large anticipated opportunity going forward. Cerulli recommends advisors leverage partnerships and innovative technology solutions to help clients achieve lower-cost access to the broadest types of investment products.

Cerulli’s latest report, U.S. Alternative Investments 2018: Accessing Evolving Alternative Platforms, focuses on the U.S. retail and institutional alternative product landscape and distribution and product development trends in the U.S. alternative asset market.

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