There are a lot of good statistics collected to show investing trends among institutional investors, according to David Katz of Larch Lane Advisors, but putting a finger on where retail investors put their money can be more difficult.
“It’s very hard to get a very good idea of what retail investors invest in and what their allocations are. Institutions report them in different ways so you can get a good sense of what university endowments are doing; that information is fairly readily available to the public, as are public pension funds,” he told ThinkAdvisor on Monday.
A December 2013 report from Goldman Sachs put the percentage of U.S. retail assets under management in alternatives at 4%, compared with 20% of institutional assets. While demand is clearly largely coming from institutions, Goldman Sachs predicted retail liquid alts represent an opportunity of approximately $2 trillion, with the potential to grow between 15% and 20% over the next five to 10 years.
PwC reported Monday that the global alternative market was on track to reach $15.3 trillion by 2020.
A survey conducted by Altegris at its Strategic Investment Conference in May found that almost 60% of respondents believe that alternatives should represent between 10% and 25% of a diversified portfolio and 15% believe the allocation should be as high as half of the portfolio.
Katz is president and chief operating officer at Larch Lane. Last year, the firm joined forces with Rothschild Asset Management to launch the Rothschild Larch Lane Alternatives Fund (RLLIX), a multimanager, multistrategy mutual fund.
“It’s the kind of fund that investors will invest in to achieve diversification, reduce volatility in their portfolios and allow them to invest in strategies that have lower correlation to the stock market and the bond market,” Katz said, and is appropriate for any retail investor, whether they have an advisor or are investing on their own.