Displaying items by tag: alternatives

Seems there’s plenty of affection for alternatives these days. Yeah; endearing, right? More and more people are holding alternatives closely, maybe, warmly, even, a vivid reflection of an ability to access a deep variety of products like those – not to mention the supporting technology, according to thinkadvisor.com.

Looking volatility squarely in the kisser, advisors are putting the pedal to the metal when it comes to turning to private funds and alternative investments, according to a bi annual survey of 400 financial advisors reported in October by Broadridge Financial Solutions, as reported by prnewswire.com. "Advisors are acutely feeling the need for diversification in their clients' portfolios but remain dissatisfied with the private fund and alternative investment products and resources available to them, largely due to limited availability and restrictive options. Asset managers are not adequately meeting financial advisors' needs, despite an understandable surge in demand against the backdrop of volatile public markets," said Matthew Schiffman, principal of Distribution Insight at Broadridge Financial Solutions. 

"We see this as a strong, long-term opportunity for asset managers to showcase their value by providing product options that meet the growing demand for alternative investments among retail investors."

According to a recent survey of active retail investors conducted by Opinium on behalf of Lansons, educating affluent investors on alternatives could lead to huge inflows. Lansons, a leading independent reputation management consultancy, partnered with strategic insights agency Opinium to conduct a nationally representative survey of 1,832 Americans. The survey found that a majority of Americans are unfamiliar with digital platforms that offer access to alternatives. Eighty percent have either never heard of these platforms or don’t know much about them. However, educating these investors could be the key to unlocking massive inflows as investors are certainly open to investing in them. Based on the results of the survey, 20% of Americans would strongly consider investing in alternatives and 7 percent are already planning to do so. In addition, active investors would be willing to allocate 25% of their portfolios, on average, to alternatives. These figures represent more than $1.3 trillion in potential investment. In addition, the current market conditions could provide an opportunity for the industry to educate investors about alternatives as nearly half (47%) of the survey respondents expressed extreme concern about the impact of inflation on their investments. Alternatives such as gold and real estate are generally considered hedges against inflation.

Finsum:If a lack of knowledge on alternative investing could be remedied, alternatives could see massive inflows. 

While institutional investors are allocating more to alternative investments, recent analysis has shown that the asset class does not help boost returns. Public Pension Investment Update: Have Alternatives Helped or Hurt? was run by the Center for Retirement Research at Boston College (CRR). It found that the investment performance of public pension funds from 2001 to 2022 averaged only 5.9%, despite increasingly larger allocations to private equity, hedge funds, real estate, and commodities. CCR looked at the returns for broad indices of alternatives and traditional equities before, during, and after the Financial Crisis. It found that alternatives substantially outperformed traditional equities from 2001 to 2007; and other than real estate, alternatives lost less than equities during the financial crisis. However, Jean-Pierre Aubry, associate director of state and local research at CRR and the brief’s author wrote that “Since the crisis, the performance of alternatives has been more mixed, with private equity and real estate rebounding somewhat, while hedge funds and commodities continue to provide lower returns.”

Finsum: A recent brief found that alternatives have not helped public pension performance due to mixed performance since the financial crisis. 

As the demand for standardized and transparent ESG disclosure rules continues to grow, a group of alternative asset managers launched a template for ESG disclosure. The ESG Integrated Disclosure Project template was created by the Alternative Credit Council, the private credit affiliate of the Alternative Investment Management Association, the Loan Syndications and Trading Association (LSTA), and the United Nations-supported Principles for Responsible Investment. The Alternative Credit Council includes 250 asset management firms that manage over $600 billion of private credit assets. LSTA is a not-for-profit trade association that includes commercial banks, investment banks, broker-dealers, hedge funds, and other institutional lenders. The template intends to provide a standard format for ESG-related disclosures and offer companies a baseline from which they can develop their ESG reporting capacity. It was designed to be completed by borrower companies and shared with their lenders. Jiří Król, global head of the Alternative Credit Council, said the following in a statement, “By simplifying and harmonizing existing market practices, this new industry-led initiative will reduce the burden on borrowers while improving the materiality and comparability of ESG disclosure for investors.”

Finsum:A group of alternative assets managers created an ESG disclosure tool that offers companies a baseline to develop their own ESG reporting capacity. 

According to a recent survey released by professional services firm Ernst & Young, institutional investors are showing more confidence in alternative assets. The 2022 EY Global Alternative Fund Survey revealed that approximately 75% of institutional investors felt their alternative asset managers "met or exceeded performance expectations during a challenging and volatile market period, successfully protecting capital in down markets while positioning for long-term income generation." Private equity received the best feedback with 50% of institutional investors citing the outperformance of expectations of this asset class. This was followed by real estate strategies at 45% and real assets/infrastructure at 38%. While the majority of investors expected to keep their alternative asset allocations constant, investors that are expecting to make changes stated that "they will increase their allocations in the next three years." The survey also found that in response to rising demand, alternative fund managers are increasing their product offerings in areas such as illiquid credit, real estate, private equity, venture capital, and opportunistic or special situations.

Finsum:Based on the results of a recent Ernst & Young survey, institutional investors are showing more confidence in alternative strategies such as private equity and real estate.