Data & Research December 13, 2011

African-American Business Owners Plan to Expand Benefits

African-American small-business owners are more than twice as likely as other small-business owners to provide more access to 401(k)-type plans within the next 12-24 months. 
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A recent small business survey by Nationwide Financial finds that 78% of African-American small-business owners say the number of workers financially unprepared for retirement is at “crisis levels.”

The Harris Poll of 501 small-business owners – including 200 African-American small-business owners – found that one in four (26%) African-American owners say they are going to enhance employee benefits over the next 12-24 months, compared with just 10% of other small-business owners.

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“It’s clear that African-American small-business owners are deeply concerned about the lack of preparation for retirement in our country,” said Eric Stevenson, vice president of sales for Nationwide Retirement Solutions. “Despite the alarming level of concern, it’s encouraging to see they are trying to do something about it by investing in their employees.”

The survey found that in the next 12 – 24 months:

  • 24% of African-American owners say they will add a 401(k) plan or some other employee self-funded plan, compared to 11% of all small-business owners
  • 28% are likely to add health insurance (11% others)
  • 19% are likely to add life insurance (6% others)
  • 16% are likely to add a company-funded defined benefit pension plan (5% others)
  • 14% are likely to add disability insurance (6% others)

The poll also found a higher level of hopefulness about the future of their businesses and the economy among African-American business owners. Thirty-eight percent expect their business to grow in the next year, compared to just 21% of all other small-business owners. They are also twice as likely as other business owners to believe the U.S. economy will improve in the next 12 months (41% to 20%).

One in four African-American small-business owners say they plan to increase employee salaries in the next 12-24 months, while just 14% of other small-business owners plan to do the same. Also, more African-American business owners (18%) plan to hire full time workers than other owners (14%).

The optimism of African-American small-business owners comes despite the fact that they say their businesses were negatively impacted within the past 12-24 months by the economy nearly as much as all business owners. African-American businesses were more likely than other businesses to have cut back on hiring (31% of African-American small businesses versus 23% of all others), more likely to have had layoffs or downsizing (17% versus 14%) or to have hired independent contractors or consultants (19% versus 11%) within the past 12-24 months.

Not all African-American small-business owners are optimistic, however. Nearly half (44%) expect the economy to be even worse next year. Roughly one-third plan to cut back on hiring (34%), eliminate or delay raises (33%), offer smaller raises (34%), or eliminate/delay bonuses (32%) within the next 12-24 months. Four in ten (40%) will hire part time employees or independent contractors and one in four (25%) are shifting more benefits costs from employer-paid to employee-paid coverage. Nearly one in five (18%) plan layoffs or downsizing within the next 12-24 months.

For more on the overall survey results, see “Nationwide Survey Reveals Misconceptions among Small-Biz Owners.” 

Data & Research December 12, 2011

Smaller Asset Managers Attracting Advisers with Specializations in Alternatives

Advisers’ interest in alternative investments is on the rise, and smaller, boutique asset managers may meet the criteria advisers want more than larger, “brand name” firms.
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Cogent Research wrote in its latest report that advisers are embracing a “go anywhere” approach to achieving portfolio goals and have expressed a greater interest in Multi-Strategy and Managed Futures strategies than in Long/Short or Market Neutral ones.   

Seventy-eight percent of all advisers surveyed use alternative investment (AI) strategies in their clients’ portfolios.  Nearly one-third of them predict that Multi-Strategy and Managed Futures strategies have the greatest potential over the next 12 months. By contrast, providers offering Long/Short Interest or Market Neutral solutions are likely to experience lower interest in the coming year as advisers look to shift their AI holdings and categories.

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“I think advisers want to bring institutional ideas to the retail marketplace,” said Tony Ferreira, Cogent Research Managing Director and co-author of the report to PLANADVISER. “Advisers are looking for investments that are going to zig when everything else zags. Alternatives offer downside protection to volatility” (see “Advisers Using Alternatives to Increase Diversification”).   

However, unlike in the case of traditional asset categories, AI users are turning to a wide variety of firms, including traditional mutual fund, ETF, hedge fund managers and other AI specialists to address their needs. “While we expected to see a range of providers, we were surprised to uncover that nearly 300 unique firms and managers were being considered by AI users,” he said. Although brands like PIMCO, BlackRock and Natixis were mentioned in their AI consideration set, smaller and emerging providers like Altegris, Hussman and Virtus are also top-of-mind among AI sellers.

 “These results demonstrate that advisers are performing extensive due diligence in their quest to find the best alternative investment solution in every AI strategy,” said Ferreira. “This would include ensuring that the firm has a sustainable long term record, that they’ve been doing this (retail or institutional), for three to four years at least.” Performances also matters, as well as fees and the stability of the people on the team, he said.  “And with these smaller boutiques, this is all they do and they’re really good at it,” he added.    

These findings and others are available in Cogent’s report, “2011 Alternative Investment Trends.” 

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