While 70 percent of advisors recommend some form of alternative products to their clients, it’s a select group. Less than one in four advisors (22 percent) implement alternative asset strategies on behalf of 50 percent or more of their clients. A good portion of advisors (39 percent) allocate alternative assets to between 1 and 19 percent of client portfolios. Only about 5 percent of advisors say they utilize alternatives for all client portfolios.
Driving Forces Remain the Same
The leading reasons advisors cite for steering clients toward alternatives remains the same from last year: diversification, risk management and volatility reduction. Few advisors use enhanced returns as a selling point; only 16 percent of advisors cited to clients that reason to use alternatives, down slightly from 19 percent last year. Among advisors, the managers most closely associated with alternative investments are AQR, Altegris, Direxion and Calamos, the 2014 survey found.
The Role of Alternatives
A majority of advisors, 61 percent, allocate alternatives to satellite positions within their clients’ portfolios, a level consistent with last year’s findings. But the number of advisors using alternatives as core portfolio positions is on the rise, with about one in three advisors citing this strategy, compared to just 28 percent in 2013. According to the AdvisorBenchmarking RIA Trend Report, there’s likely considerable overlap between advisors using alts as a core strategy and those who cite using alternatives assets for their superior returns. (To read more of the research, go to www.wealthmanagement.com/research/advisor-benchmarking)