Over the past decade, traditional asset managers have been gradually crossing over into the alternatives space, according to new research from Cerulli Associates. Firms are developing alternative asset products or acquiring alternative asset businesses to enhance their traditional fund offerings and diversify their revenue sources, according to the Boston-based global analytics firm.
“Demand for alternative assets has heated up," says Pamela DeBolt, a senior analyst at Cerulli. "Investors and advisors look to these assets to provide portfolio diversification, enhanced returns, and to manage risk."
Seventy-two percent of firms that participated in the study have built their alternative business internally. One-third have expanded by hiring sub-advisors. This gives firms the ability to maintain control over the product development and distribution process, says Cerulli.
To get products into distribution quickly, some firms choose to acquire experienced portfolio management teams (31 percent) or specialty shops (19 percent) to bolster their alternative lineup.
More than 50 percent of asset managers surveyed said that alternative investments are either more important than other initiatives or the most important initiative within both retail and institutional channels.
The managers surveyed anticipate that, on average, alternative mutual fund assets will account for 13.6 percent of their total mutual fund assets in 10 years, up from 2.2 percent at the end of 2012.