Alternative investments are being used by nearly 40 percent of U.S. advisors, representing 7.2 percent of their total assets under management in 2017, according to a new report by Cerulli Associates.
That’s an increase in use by advisors; in 2016, alternative investments made up 5.7 percent of advisors' AUM, the report said. The report also noted alternative assets were up 2 percent in the first quarter of 2018.
Alternative exchange-traded fund assets grew nearly 15 percent in 2017 and were up 1.7 percent in the first quarter, continuing a growth trend that started in 2016, the report said.
"This past year, the global alternative investments industry benefited from two main drivers: strong economic growth across North America, Europe and Asia, and the growing attraction institutional investors have for alternative assets in these markets," said Michele Giuditta, director at Cerulli, in a prepared statement.
Worldwide alternative investment assets amounted to just under $9 trillion at the end of 2017, according to the report.
The report found that 40 percent of advisors report using alternatives, and more than 37 percent report using liquid alternative mutual funds, according to the report. Wirehouses (57 percent), hybrid registered investment advisors, or RIAs (43 percent) and retail bank broker-dealers (64 percent) are among the primary users of alternative investments, the report said.
Advisors, however, do harbor some doubts about alternatives, according to the report. Sixty-five percent of advisors surveyed said they believe that fees for alternative investments are too high and "they are not sure how to include alternatives in client portfolios," the report said.
"Advisors have played an increasingly important role in the spread and adoption of alternative investment products across different channels," Giuditta said. "RIAs continue to be the leading channel alternative asset managers target for their investment products."
ETFs appear to be poised to fuel alternative fund growth more than mutual funds, according to the Cerulli report.
There were 58 alternative mutual funds launched in 2017, which was slightly more than the 55 that were launched in 2016, according to the report. By comparison, the number of alternative ETF and exchange-traded note launches in 2017 increased 62 percent and 75 percent, respectively.