Wealthy investors dumping cash and equities, buying alternatives

Alternative investments are 'increasingly becoming core,' strategist says
FEB 21, 2014
By  CODONNELL
High-net-worth investors — often considered a bellwether for retail investors — are upping exposure to alternative investments, primarily at the expense of cash and equities. A majority of affluent investors, about 60%, that already have alternatives increased their exposure in the last year and another 25% expect to boost holdings in the future. The typical portfolio among high-net-worth individuals currently has about 22% of assets in alternatives, according to a March 4 survey by New York Life's MainStay Investments. “High-net-worth individuals look at these funds as complementary right now, but they are increasingly becoming core,” said Matthew Leung, head of channel marketing strategies at MainStay Investments. (More: Could alternatives fit in retirement portfolios?) Along with increasing exposure, investors are also holding these assets for a long time. The typical investor has been holding alternatives for 8.3 years, the type of holding period that's typical of a core asset, Mr. Leung said. A major driver of this increased exposure is the proliferation of liquid alternatives, such as mutual funds and ETFs, Mr. Leung said. About 65% of high-net-worth investors use mutual funds for exposure to alternatives, and another 40% use ETFs. “In the past, the alternatives space was really reserved for private institutional clients,” Mr. Leung said. “These strategies are becoming increasingly accessible for retail investors.” But the fear of risk is keeping other investors — 49% of respondents — from jumping on the alternative investment bandwagon, according to the survey. This group of people could benefit from a better understanding of these investments, and financial advisers are well-positioned to help, Mr. Leung said. (Related: Few advisers recommend alternative investments) In fact, 60% of respondents see advisers as key sources of investing ideas and education. To best serve clients considering these funds, advisers should prepare data and charts showing the benefits of boosting alternatives exposure to about 10% to 15% of a portfolio, Mr. Leung said. The survey was conducted late last year by Harris Interactive and relied on responses from 806 investors, each of which had at least $1 million in investible assets. Altegris Investments Executive Vice President Dick Pfister on identifying the right time to invest in alternatives

Latest News

The power of cultivating personal connections
The power of cultivating personal connections

Relationships are key to our business but advisors are often slow to engage in specific activities designed to foster them.

A variety of succession options
A variety of succession options

Whichever path you go down, act now while you're still in control.

'I’ll never recommend bitcoin,' advisor insists
'I’ll never recommend bitcoin,' advisor insists

Pro-bitcoin professionals, however, say the cryptocurrency has ushered in change.

LPL raises target for advisors’ bonuses for first time in a decade
LPL raises target for advisors’ bonuses for first time in a decade

“LPL has evolved significantly over the last decade and still wants to scale up,” says one industry executive.

What do older Americans have to say about long-term care?
What do older Americans have to say about long-term care?

Survey findings from the Nationwide Retirement Institute offers pearls of planning wisdom from 60- to 65-year-olds, as well as insights into concerns.

SPONSORED The future of prospecting: Say goodbye to cold calls and hello to smart connections

Streamline your outreach with Aidentified's AI-driven solutions

SPONSORED A bumpy start to autumn but more positives ahead

This season’s market volatility: Positioning for rate relief, income growth and the AI rebound