A strong majority of millennial investors are interested in alternative mutual funds, AMG Funds reported this week in announcing results of a recent poll.
The survey found that affluent investors in the 18-to-35 age bracket were generally optimistic about the U.S. economy and global markets, tuned in to how active management can generate investment returns and recognized the value added by financial advisors.
The online survey was conducted in September among 980 investors, 18 and older, with more than $250,000 in household investable assets, who participated in making household savings and investment decisions.
“The findings of our study provide meaningful insight into the mindset and outlook of a highly important demographic among individual investors,” AMG Funds chief executive Jeffrey Cerutti said in a statement.
“Our findings show that millennials have an open mind with respect to investing, and that even in an increasingly technology-driven world, they value the skill of experts in both stock-picking and financial advice.
Eighty-three percent of millennials in the poll expressed openness to alternative investment strategies—including hedge funds, private equity, real estate funds or other non-traditional investments—compared with 52% of investors over age 35.
More than half of millennials said they invested in alternatives, but 69% said they would like to know more about the benefits of alternative investing.
Seventy percent believed that a liquid alternative mutual fund would add value to their current investment portfolio.
In another finding, 78% of millennial respondents believed it was possible to outperform market indices through expert stock selection. In addition, 56% said they currently owned actively managed mutual funds, and nearly all planned to maintain or increase their current allocations to active funds.
More than a quarter ofmillennials in the poll ranked growth maximization as their top investment goal. AMG found it “surprising” that generating income—a goal typically associated with retirees—was equally popular among millennial respondents.
Three-quarters of millennials surveyed said they expected the U.S. economy to improve, and a majority expected both U.S. and non-U.S. equity markets to rise.
Eight-six percent of millennial respondents said they had a long-term investment outlook regarding, with 73% feeling well-positioned for a market downturn and nearly half describe their risk tolerance as “aggressive.”
At the same time, some 30% of millennials—significantly more than any other age cohort in the study—said they would either reduce their equity exposure or pull out of the market entirely in the event of a 20% drawdown.
Sixty percent of millennials in the survey said they were willing to pay more for oversight of their investments, and 90% ofthose who already receivedadvice said they relied most on financial advisors for portfolio diversification.
However, 72% of these investors believed that a portfolio that included a wide range of stocks was adequately diversified. AMG said this indicated a need for greater education and advice from financial advisors in helping millennials to make investment decisions.
“Our findings are a call to action for advisors to engage with these clients, so they can address millennials’ unique investing needs and perspectives while providing advice and education around the benefits of alternative strategies and active management,” Cerutti said.