Survey respondents said education is the key to increasing demand for alternatives. Smith said advisers must ensure clients have an understanding of the role alternatives should play (i.e., diversification, return driver or both) and what can be expected from adding them to a portfolio.
Market volatility can cause people to abandon their overall investment strategy, so alternatives can smooth this problem and help clients maintain long-term investment goals, Smith said. “We think it’s a great opportunity for investors, and we do believe these types of investments can be very beneficial over the long run,” he added.
Advisers should set the expectation that alternatives will not return 20% a year, for example. They should also educate clients on quality versus non-quality alternative investments.
The survey has been conducted since the 1990s, and Smith said education about alternatives has remained important to the respondents. “When you start talking alternatives, there is a learning curve attached to that,” Smith said.
Russell’s global survey report can be downloaded here: http://www.russell.com/institutional/research_commentary/alternative-investing-survey.asp.