Eight In 10 Advisors Use Alternatives But Only One In Three Clients Are Interested
Investment clients are slower to come around, however, as only a third of clients want to use alternatives, according to a survey by American Century Investments. Among those clients, the typical allocation to alternatives in 17%.
Ninety percent of wirehouse brokers use alternatives, compared with 68% of RIAs, according to the survey of 300 advisors with a book of business of $10 million or more. Among those using alternative strategies, 55% plan to increase their use next year.
When asked to identify the “most attractive” feature of alternatives, 41% of advisors cited low correlations with traditional asset classes, 29% cited the potential for broader portfolio diversification, and 12% cited the potential for higher returns.
The alternative assets used most often are precious metals (40%), natural resources (39%), U.S. REITs (33%), and emerging markets debt (20%).
The survey report suggests that commodity and real estate-related investments are easier for advisors to explain to clients, compared with hedge funds, long/short strategies and other alternatives.
Mutual funds are used by 42% of advisors to access alternative investment strategies, followed by ETFs at 28%.