Gabriel Burstein, head of investment strategy at Curian Capital, said advisors who use ’40 Act alternative funds need to understand what he considers to be a misrepresentation in the market between alternative strategies and alternative assets.
Alternative assets, such as real estate and commodities (and there’s a debate over just how “alternative” they are), are more correlated to the overall market than alternative strategies, and as a result are three to four times more volatile than alternative strategies because they tend to move in the direction of the overall market.
As such, Burstein said financial advisors need to shift the mindset of their clients away from alternative assets and more toward alternative strategies that can provide strategic diversification away from the overall market
“Clients need strategies that provide diversification of returns,” he said.
Burstein cited research from Cerulli Associates showing that only 34 percent of advisors use alternative-oriented mutual funds. “It speaks to the huge potential of these funds.”