A recent survey shows that well-off Americans have significant holdings in alternative investments, with that category broadly defined to include real estate, private equity, and hedge funds–and are more satisfied with the performance of those alternatives than they are with traditional assets.
The survey, sponsored by Bank of America, was of individuals with more than $3 million in investable assets. They were much more likely to be in hedge funds–of the 400 people studied, 92 were invested in hedge funds or funds of funds and 267 reported having some other alternative investment.
The population of individuals with $3 million-plus represents the largest segment of high-net-worth investors investing in alternatives, explained David Bailin, president of Bank of America Alternative Investment Solutions.
This group is receiving more professional advice than ever before, including facts regarding the benefits and risks of alternatives, advice as to building diversified portfolios, and access to great managers, Bailin suggested. “They are getting more asset classes and more diversification, which in this market environment is really valuable,” he said.
The Danger of Imitation
The investors expressed greater satisfaction with alternatives compared to traditional investments. That is in part due to current conditions. Recent market turbulence appears to have affected hedge funds less than expected, despite news reports of hedge fund disasters, as Hammond Associates pointed out in a recent report.