May 29, 2012 ---
Financial advisers and institutional investors continue
to use alternative investments, but the growth of their use has begun to slow.
According to a survey by Morningstar
and Barron’s in January, approximately 65% of advisers and 67% of
institutions indicated that alternative investments are as important
as or more important than traditional investments, down
slightly from the last survey. Institutions indicated rising interest and use
of alternative investments in each of the previous three surveys, but this year’s
survey saw some retreat. Among the institutions surveyed, 26% indicated they
plan to allocate more than a quarter of their portfolios to alternative
investments, down from 37% in the last survey.
For the second year in a row,
advisers cited managed futures as the asset to which they were most likely to
increase their exposure, while currency funds did not make their top five.
Institutions flagged managed futures as the third most popular strategy for
increased allocation, while long/short equity (or debt) and private
equity/venture capital were the top two strategies for increased
Institutions said lack of liquidity
was the greatest impediment to using alternative investments, while advisers
cited higher fees. Uncertain benefits and lack of transparency were also top
Over the years, the percent of
advisers concerned about lack of liquidity has fallen sharply, from 60% in 2009,
to 40% in the most recent survey, coinciding with the launch of many new liquid
The survey received responses from 264
institutions and 365 financial advisers. Additional results and charts
can be viewed here.