The public markets will to continue to be turbulent for at least the next three to five years, increasing the importance of alternative investments, private wealth managers say in a new survey.
Investors will look to alternative investment opportunities to protect wealth and generate income, according to a survey of 73 private wealth managers by Aequitas Capital at a recent private wealth conference. Aequitas Capital is an investment management firm headquartered in Portland, Ore., that specializes in alternative investments and has $300 million in assets under management.
Nearly half of the respondents have more than 30% of their investments in alternatives and more than 74% say they will increase their use of alternatives over the next three years, despite alternatives' having less liquidity and transparency and a shorter track record. About six in 10 (58%) use alternatives to generate income in their private portfolios.
Generating investment income is important to 75% of the respondents and only 7% feel U.S. Treasuries are the best way to do that.
Respondents note that the investing environment is complicated by the European debt crisis, the global economic slowdown, the U.S. presidential race and the possibilities of a U.S. recession.
Asked where they are looking for returns, the largest group (29%) said "other alternatives," rather than stocks, venture capital, commodities, bonds and treasuries. Four in five say they expect some changes in the way they invest in the next few years.
"We are at a historic time when the publicly traded markets struggle to deliver reasonable returns on invested capital and don't provide enough returns to be considered a safe haven," said Robert Jesenik, Aequitas Capital CEO. "Instead, private wealth managers have little option but to pursue their investment goals through non-traditional private investments with low correlation to public markets."
-Karen DeMasters