There’s good news for advisors seeking additional liquid alternative investments for clients.
New research from Boston-based Cerulli Associates, “Alternative Products and Strategies 2013: Identifying Enduring Opportunities in Complex Markets,” reports increased interest among alternatives managers in providing liquid alternative products to retail investors.
“Based on our recent research, we expect to see a range of product offerings from asset managers,” says Pamela Carello DeBolt, a senior analyst with Cerulli Associates in an interview.
“We see a few trends going on,” DeBolt adds.
Traditional alternative managers are crossing over into the (Investment Company Act of 1940) space to diversify revenue stream and offer a broad range of alternative product offerings to multiple investors from retail, high net worth, and institutions, she points out.
In addition, traditional asset managers are adding alternative capabilities through acquisition, partnership and subadvisory.
“When we surveyed asset managers about their plans for product development in the third-party intermediary space, 88% of respondents stated they plan to launch four or more products over the next 12 months ranging across several types of vehicles such as mutual funds (open- and closed-end), ETFs, separately managed accounts,” DeBolt notes.
According to Cerulli, asset managers are distributing alternative investments to institutions, retail investors and the high-net-worth segment (investors with a net worth between $10 million and $50 million), which straddles the two.
Each market favors specific vehicles in packaging alternative investments.
Large institutions have used alternative strategies for some time, employing them in the form of hedge funds and private investments through commingled and direct limited partnerships, funds of funds, managed accounts, separate accounts and UCITS.
Since 2008, more of these strategies are being made available for retail investors in liquid open-end and closed-end mutual funds and exchange-traded products (ETPs) — exchanged-traded funds (ETFs) and exchange-traded notes (ETNs).
Investment consultants and financial advisors play a vital role in the distribution of these strategies.
More than 50% of surveyed asset managers state that alternative investments are either more important than other initiatives, or the most important initiative within both retail and institutional channels, and 68% state the same for high-net-worth clients. In fact, alternatives are the most important initiative for 35%, 42%, and 32% of managers, respectively, across the aforementioned channels.