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Portfolio > Alternative Investments

Investors increasing allocations of alternative assets

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International stocks make up the most popular mutual fund flows by asset class, according to new research.

Cerulli Associates discloses this finding in “The Cerulli Edge: U.S. Asset Management.” Focusing at length on alternative investments, the report also offers insights into fixed income, private equity, customization and organizational alignment to enhance distributor relationships, marketing and sales plans.

For the trailing 12 months ended February 2014, the survey finds, mutual fund flows of international stocks constituted $142.2 billion, a total that significantly outstrips other asset classes. The next three largest asset classes for the prior 12 months included:

  • Balanced funds ($94 billion);
  • U.S. stock ($60.1 billion); and
  • Alternatives ($41.3 billion).

“[P]ortfolio managers have tilted away from traditional domestic core equity and fixed income,” says Cerulli Director Cindy Zarker. “As economic signs of recovery heightened concerns of rising interest rates, many managers presented institutional and retail investors with investment options to hedge this risk.”

The report adds most institutional investors intend to maintain or increase their alternative asset allocations in 2014. Among the target sectors within this asset class are private equity, hedge funds, real estate and infrastructure.

The heightened focus on alternative investments has been an ongoing theme in recent months. Findings recently unveiled in “Investing Outside the Box,” a study on trends in nontraditional investing from MainStay Investments (a New York Life company and Barron’s Top Fund Family) reveal that high net worth investors on average have 22 percent of their portfolios invested in alternatives. One quarter of these investors (26 percent) see their exposure to alternatives increasing over the next five years by an average of 2.9 percentage points. Another 66 percent believe their level of exposure will remain the same.

And as reported by Cerulli last month in the “Cerulli Edge: Institutional Edition,” international equities remain the predominant focus of all new products under consideration or development (24.1 percent), followed by global equities (14.9 percent), world bonds (13.5 percent) and asset allocation/global tactical asset allocation strategies (10.6 percent).

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