Alternative Products Still a Focus for Asset Managers

Cerulli's annual report on the retail alternatives space finds more than 70% of asset managers cite the desire to help investors boost risk-adjusted returns as the primary driver in offering these products.

In addition to wanting to deliver better performance, firms also see alternatives as a means of differentiating themselves in a competitive marketplace. Cerulli sees asset managers’ emphasis on competitive differentiation as a shift in thinking. Firms may be less concerned about the impact of the market crisis and volatility, and are more concerned about their firm’s long-term business strategy.  

“The number of alternative mutual funds has tripled since 2003, with 65 new funds launched in 2010,” commented Pamela DeBolt, senior analyst and contributor to Cerulli’s annual retail alternatives research.

Alec Papazian, retail asset management analyst and co-contributor to the research, added: “Our research reveals that nearly 40% of asset managers view distribution one of the most significant challenges in offering alternatives. In order to access shelf space, product providers need to understand what gatekeepers are looking for in alternative investments. Aspects such as investment process, the firm’s and portfolio manager’s reputation and track record, use of derivatives, underlying benchmarks, and proper disclosures can be key criteria for some gatekeepers. It’s incumbent upon asset managers to learn which alternatives criteria are most important to their distribution partners.”