Market
Memos from Howard Marks: Ruminating on Asset AllocationImage
Introducing The Alts Institute Alternative Investing Survey
Original research highlights the vital role of advisors in helping investors understand, access and use alternatives
The rapidly expanding alternatives marketplace has reshaped traditional portfolio strategies and created new opportunities for advisors and investors alike. At this pivotal point for alternative investments, we conducted an intercontinental study to explore the views and beliefs of high-net-worth investors on alternatives and the attending conversations between advisors and their clients.
Our research, focused on investors with $2.5 million or more in household investable assets and advisors with an average practice AUM of $633 million, offers valuable insights into best practices for how alternatives can lead to enhanced client conversations and portfolio construction.
Understanding Today’s Alternative Investors
As alternatives become increasingly important to investors’ portfolios, understanding investors' distinct attitudes, beliefs, and motivations around alternative investments can help financial professionals and clients have more meaningful conversations. A segmentation analysis of the North America and Asia high-net-worth investor surveys revealed three archetypes.
Alts Champions
Ready and Eager to Expand Alternatives Footprint
Key Characteristics
- Focus more on upside potential than downside risk
- Believe alternatives are essential to a successful portfolio strategy
- Want greater variety beyond their current portfolio holdings
Working with Alts Champions
- Provide knowledge and guidance on new alternative investing opportunities
- Explain products or strategies in depth, with a focus on the benefits of alternatives to their portfolio
- Stay “ahead of the curve” on alternatives
Emerging Adopters
Open to Increasing Alts Allocation, Seeking Deeper Insight
Key Characteristics
- Focused on the long term and have a favorable view of alternatives generally
- Comfortable with illiquid investments as long as they can redeem within a reasonable timeframe
- Interested in investing in alts or putting more money into alts and many are willing to allocate as much as 20% to the asset class
Working with Emerging Adopters
- Offer more in-depth knowledge about alternatives and address common misconceptions (e.g., long timeframes and illiquidity)
- Talk about different alts vehicles across public and private markets that align with their risk tolerance and can mitigate liquidity concerns
- Bring alternative investing opportunities that align with their interests
Traditionalists
Willing to Invest in Alternatives, Want Advisor to Make a Strong Case
Key Characteristics
- Focused on the long term and growing their portfolio while keeping an eye on income and capital preservation
- View alternatives more as a diversification tool than a core portfolio holding
- Less knowledgeable about alternatives but willing to invest if their advisor makes a good case for using alternatives in their portfolio
Working with Traditionalists
- Provide education about the benefits of alts and the growing universe of alternatives, including opportunities without long lockups
- Show how alternatives fit with personal goals and interests
- Start with small initial investments and increase exposure after demonstrated success