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August 31, 2011 at 08:00 PM
Seventy-eight percent of retail advisors are using alternative investments within client portfolios, according to a new report.
Cogent Research LLC, Cambridge, Mass., published this finding in a summary of results from an annual report, 2011 Advisor Brandscape, that is based on a nationally representative survey of 1,643 retail investment advisors. The report includes a new section on advisors’ usage and attitudes regarding alternatives.
The primary reasons that advisors are using alternatives, the study says, are to further diversify portfolios (83%), manage risk (80%) and achieve absolute returns (54%). By contrast, fewer advisors than in prior years are using alternatives to deliver returns above a benchmark (20%) or for tax management purposes (19%).
Cogent found that advisors now allocate an average of 11% of their book to alternatives spread across a variety of different products.
Independent advisors, the heaviest overall users of alternatives, show the strongest preference for venture capital, private equity, and hedge funds. Bank advisors have a greater appetite for limited partnerships and RIAs tend to use structured products/notes.
