Investors Increasingly Turning Toward Alternatives

Nontraditional investment opportunities are attracting more investors looking to protect wealth, achieve returns and generate income, according to a recent poll.

Nearly half of respondents (48%) of the Aequitas Capital poll of attendees at a recent Opal Financial Group private wealth conference said they now consider alternative investments as a primary part of their portfoliomeaning more than 30% of their portfolio is in alternatives. Approximately 78% expect to increase their allocation to alternatives over the next three years even though these investments often have less liquidity, transparency and an inferior track record.

Respondents indicated that the investing environment has become strained by the European debt crisis (24%); global economic slowdown (21%); U.S. presidential elections (19%); and the possibility of a U.S. recession (11%), causing investors to expand their search for private investment alternatives.

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Twenty-nine percent of respondents cited “other alternatives” as demonstrating the greatest potential in the near future, compared with those who named real estate (23%), stocks (16%), venture capital (14%), commodities (12%), bonds (5%) and Treasuries (1%).

The poll included respondents from 73 private wealth managers, and was administered by Aequitas Capital and Opal Financial Group.

 

ETFs Gaining Popularity in Alternatives Universe

Though advisers are more likely to choose mutual funds over exchange-traded funds (ETFs) to access alternatives, ETFs are catching up.

Among advisers who currently access alternatives, 29% expect to increase ETF use, Cogent Research’s Alternative Investment Trends 2012 report found. The majority of investors (78%) still prefer mutual funds over ETFs (58%), but just 17% plan to increase their use of mutual funds.

Investors who are not currently utilizing ETFs to meet alternative investment needs are almost twice as likely as mutual fund non-users to begin doing so over the next two years (17% vs. 9%).

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“Advisers continue to flock to ETFs that access alternative investments for the same reasons they seek this vehicle in traditional asset classes—cost efficiency, liquidity and transparency,” said Steven Sixt, senior project director and study co-author.

The 2012 Alternative Investment Trends report surveyed 1,741 U.S. retail investment advisers via the Web in March 2012.

For more information, visit www.cogentresearch.com.

 

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