Advisers opt for alternative investments amid volatile markets
Advisers are increasingly leaning on private funds and alternative investments amid volatile equity and bond markets, new research has shown.
Fintech Broadridge Financial Solutions found that 67 per cent of advisers said they were recommending alternatives and private funds today, compared to 59 per cent in the first quarter of 2022.
Meanwhile, 52 per cent of those already opting for alternatives said they plan to increase usage over the next two years.
The survey also found that diversification is the most common reason for advisers using or considering such products (76 per cent cite it as a top reason), followed by non-correlation with equity markets (69 per cent).
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Broadridge Financial Solutions’ biannual survey of 400 financial advisers, published today, found that despite the surge, the surveyed advisers claim to lack sufficient options and the resources needed from asset managers to implement these products in their portfolios.
Just 27 per cent of financial advisers who use or plan to use alternatives are very satisfied with the private funds and alternative investments products and resources available through their firm, while 16 per cent report dissatisfaction overall.
“Advisers 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”, Matthew Schiffman, principal of distribution insight at Broadridge Financial Solutions said.
“Asset managers are not adequately meeting financial advisers’ needs, despite an understandable surge in demand against the backdrop of volatile public markets.
“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.”
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As advisers seek diversification, many expressed that they do not view cryptocurrency as a viable option. Instead, financial advisers report using alternatives such as real estate and real estate investment trusts (70 per cent), commodities (39 per cent), and private equity and venture capital (35 per cent).
Use of cryptocurrency is at just five per cent, unchanged since the first quarter of 2022.
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