Now that alternative investments have gone mainstream, LPL financial advisor Erik Johnson says his clients are increasingly inquiring about how to invest in them. But he finds that the proliferation of alternative investments poses challenges.
“One of the challenges is education and categorizing where the different alternatives fall so that we can be sure to use them appropriately,” said Johnson, a financial planner at Johnson Advisory in Kernersville, N.C. “Alternatives are defined so broadly that If you’re not in traditional investments then you’re considered to be in alternatives, which includes a wide range of products.”
To better educate himself and stay abreast of new alternative products, Johnson last week attended LPL Financial’s three-day alternative investment conference at the Westin New York At Times Square Hotel. LPL Financial President and Chief Operating Officer Robert Moore and alternative investment gurus from the likes of The Carlyle Group and The Blackstone Group were guest speakers.
“I attended the conference because I am always looking to know more about the options we have available and to know how the products work and to differentiate between companies that offer alternative investment products,” Johnson said.
The conference was a pilot program that may be expanded to educate advisors nationwide about alternative investments.
“We've noticed that our FAs gravitate towards income producing alternative investment vehicles such as BDCs (business development companies) and other products for their diversification qualities, such as alternative strategy mutual funds,” said Robert Pettman, senior vice president of LPL’s annuities and alternative investments.
LPL offers alternative products from companies such as Alkeon Capital Management, SkyBridge Capital, Steben & Co., Cole Real Estate Investments, NorthStar Realty Securities and Franklin Square Capital Partners.
“Our advisors are looking to understand how to optimize allocation across various alternative strategies based on the needs of their clients, and so they are seeking guidance for implementation,” said Pettman, who spoke at the conference.
LPL’s research department offers advisors alternative investment recommendations based on investment objectives such as growth, growth with income and income with moderate growth.
“Recommended allocations are not an interactive tool but merely a guide,” Pettman said. “They cover the broad category such as managed futures, REITs and MLPs. But we don’t make recommendations at the product level, although we do for alternative strategy mutual funds."