Investments advisors appear poised to accelerate their use of
alternative investments such as hedge funds, real estate and
commodities, according to a new poll.
The national poll
by Rydex AdvisorBenchmarking Inc. found that 55% of advisors expect to
increase their allocations in alternative investments by 25% over the
next five years, and 13% plan to increase their use of the investments
by more than 75%.
In terms of the
specific investments they are targeting, 24% of those surveyed said
they believe capital protected and structured products, including
commodities, have the greatest growth potential. Also cited as
growth areas were real estate, 16%; private equity and venture capital,
15%, and hedge funds, 13%.
"Alternative
investments are becoming increasingly important to advisors," said Maya
Ivanova, research analyst for Rydex AdvisorBenchmarking Inc. "In fact,
our survey indicates that nearly one fourth of advisors believe that
they will be more important than traditional investments-such as
stocks, bonds and cash-in the coming years."
These were among the other findings of the survey:
Among the reasons cited for turning to alternative investments are a
desire to use different investment techniques, 40%; seeking absolute
returns, 38%; filling portfolio allocations, 29%; addressing portfolio
correlations, 28%, and seeking unique vehicle structures, 25%.
A majority of advisors, 51%, believe retiree clients are hesitant to
invest in alternative investments mostly due to a lack of
understanding. Other reasons cited were a lack of liquidity, 27%, and a
lack of clarity in how alternative investments work in an overall
portfolio strategy, 27%.
A large majority of advisors, 90%, believe hedge fund registration is a positive development.
The survey was conducted online with 333 RIAs in November 2006, according to Rydex.