Alternatives have long been in vogue with institutional investors seeking to diversify sources of return, but are now rapidly moving into the mainstream retail investment market (industry data shows that ordinary investors are expected to increase their alternatives allocation from 3 to 25 perc ent) in the coming year.New research commissioned by multi-asset value investment specialists Seneca Investment Managers, finds that over nearly all (96 per cent) advisers surveyed believe alternative assets are important to consider in overall client asset allocation.
Advisers cited a range of reasons for the positive momentum of alternatives in portfolios, including the fact many felt the asset class was a good hedging tool against capital/stock markets (58 per cent); clear diversification benefits (58 per cent) and the ability to generate alpha (52 per cent).
However, Liquidity risk (34 per cent) is one feature that keeps advisers steering clear of alternatives, alongside the potential of transaction costs edging higher for these alternative assets (44 per cent). In addition, nearly two in five (38 per cent) advisers felt that they had too little an understanding of the asset to steer their clients’ capital towards it, while inaccessibility (43 per cent) to the asset class was also a consideration for the Adviser community.
Steve Hunter, Head of Business Development, Seneca Investment Managers, says: “Correlations between traditional asset classes have increased; institutional investors recognised the benefits of alternatives a long time ago, so it’s good to see the retail market catching on to the benefits of diversification as risk levels sharpen.
“Alternative investments have become more common in investor portfolios but the challenge of accessibility relative to more traditional assets remains. Investment Managers with a long track-record and intrinsic and disciplined approach to real assets and alternatives selection can provide investors access in an efficient way that can support their overall investment objectives.”