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Portfolio > ETFs

Cerulli: Alternative Investment Strategy Vehicles More than Doubled Between 2007 and 2011

By Warren S. Hersch

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The number of alternative investment strategies used among four popular types of products more than doubled between 2007 and 2011, according to a new report.

Cerulli Associates, Boston, published this finding in its May 2012 issue of “The Cerulli Edge: U.S. Asset Management.” The monthly publication analyses topics related to product development and strategy, distribution, pricing, and market segmentation.

The research reveals that the number of open-ended mutual funds (OEMFs), closed-ended funds (CEFs), exchange-traded funds (ETFs) and exchange-traded notes (ETNs) increased to 1,019 products by 2011 from 430 products in 2007.

The report notes that long-short extension strategies are currently in development or are being considered by 39% and 11%, respectively, of asset management firms. Also in development or being considered among a significant percentage of these firms are multi-alternative/alternative allocation strategies (28% and 11%, respectively), currency (28% and 11%) and absolute return strategies (17% and 6%).

Among commodity assets, the report says, 58% are in ETFs, 39% are in OEMFs and the remaining assets are in CEFs and ETNs. Nearly all of the alternative allocation fund assets (97%) are in mutual funds; just 2% are in ETFS. By contrast, the report notes, most inverse with leverage fund assets (94%) are in ETFs.

On average, asset managers report focusing a plurality (42%) of their product development efforts on alternative strategy mutual funds or ETFs; only 13% focus on developing these strategies in other vehicles.

An additional 35% focus on traditional strategy mutual funds and ETFs. And 10% of asset manages focus on traditional strategy products in other vehicles, the report says.

While assets in alternative mutual funds and ETFs have increased more than 160% since 2008, the report observes that they ended the year at only $379 billion: $214 billion in alternative mutual fund assets; and $165 billion in alternative ETFs assets.

These figures compare with $209 billion and $161 billion, respectively, in 2010; and $134 billion and $126 billion, respectively, in 2009.

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