Advisers seek ‘alternatives’ edge from third party funds
Third party funds are the first port of call for advisers when seeking exposure to alternative assets on behalf of their clients, according to new research by Seneca Investment Managers, a boutique Multi-Asset Value investment specialist.
When asked how they plan on getting exposure to alternative assets on behalf of clients, the most popular route for advisers (56 per cent) is through third-party multi-asset funds. Indirect investment follows (eg indexes, listed funds like private equity, REITs and property trusts), with nearly half (49 per cent) of advisers open to this route to market. Just 1 per cent of advisers didn’t plan on accessing alternative investments at all.
The research also suggests advisers are becoming increasingly open-minded about what constitutes an alternative asset. As many as two in five (41 per cent) advisers consider most assets with returns that is negatively correlated to the stock market as potentially representing alternative investments. This broad-brush view becomes further established when we discover that even ‘lesser researched’ assets could be considered ‘alternative’ by two in five (43 per cent) advisers, while two-fifths (42 per cent) feel anything outside of traditional capital market investments like stocks and bonds would be considered an alternative asset.
Advisers’ openness to what constitutes an alternative asset bodes well for clients where there are various new solutions in the market of alternative investments. Though this is often blocked by the risks around the inaccessibility (43 per cent) and liquidity (34 per cent) associated with holding them.
Steve Hunter, Head of Business Development, Seneca Investment Managers, says: “It’s a big, bad world out there, and alternative investments can take on many definitions depending on who you are talking to. Inaccessibility has long been an issue for investors so it’s good to see more products in the market, and to see these carry greater appeal to the investor. However, alternative assets can pose unnecessary risks to clients return objectives if investments are not well understood.”