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Investors Plan to Boost Alternatives Allocations

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Institutional and high-net-worth investors are bullish on alternative investments, a survey released Tuesday by Altegris Advisors showed.

Sixty-six percent of respondents said they planned to raise their allocation to alternatives in the second half of this year.

Managed futures and global macro strategies, favored by 32% of investors, and private equity, named by 28%, were the top asset classes for increased allocations.

A closer look at responses showed that 45% of RIAs and 31% of private investors favored managed futures and global macro, while 36% of institutions put private equity first.

Fifty-nine percent of respondents said alternative allocations should represent 10% to 25% of a diversified portfolio, while 15% said the number should be between 25% and 50%.

Only 23% thought the allocation should be less than 10%.

Altegris conducted the survey at the 2015 Strategic Investment Conference, which it hosted with Mauldin Economics April 29 to May 2. It was attended by 649 private and institutional investors, RIAs, hedge fund managers, bank or wirehouse advisors and independent broker-dealers, 124 of whom participated in the survey.

The poll found that 63% of investors used alternatives to complement traditional strategies, while 17% used them as a substitute for traditional stock strategies and 15% to hedge against volatility in the market.

One notable finding: 60% of respondents said clarity about investment philosophy and strategy was the most important consideration in choosing an alternative product. 

Just 19% of investors said historical returns were the most important selection criterion.

Twenty-four percent considered lack of clarity about investment philosophy and strategy a major concern regarding investing in alternatives, and 53% fretted about fees.

“While investors are beginning to see the value of alternatives in a portfolio, the industry still has work to do to ensure that clients understand the role and net return characteristics of specific alternative strategies,” Matt Osborne, head of marketing and business development at Altegris Advisors, said in a statement.

“This is particularly the case as more alternative strategies, such as private equity, become available to a wider audience of qualified investors.” 

— Check out 10 Phrases to Avoid When Talking About Alt Investments on ThinkAdvisor.

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