Advisors Increase Alternative Investments in Client Portfolios, Millennial Interest Persists
March 29 2023 - 10:00AM
A new Cogent Syndicated report from Escalent shows 70% of advisors
are using alternative investments in their clients’ portfolios.
Advisors are currently allocating an average of 7% of their assets
to alternatives and anticipate increasing this allocation to 10%
over the next two years—revealing a growing interest in the
category.
Among accredited investors (a regulatory
requirement by the SEC to limit investments in alternatives),
millennials lead in familiarity with—and ownership of—alternative
investments. Eight in ten millennials are interested in learning
more about alternative investments and more than six in ten have
actively taken steps to learn more about alternatives.
“Many asset classes experienced double-digit
losses in 2022 and, as a result, advisors and investors are turning
to alternative investments in hopes of decreasing volatility and
increasing returns,” said Kristin Hall, product manager in the
Financial Services research division of Escalent and author of the
report. “Alternatives can serve as both a workhorse and a
racehorse—earning slow and steady but also fast. Their low
correlation to public markets can drive performance and support
capital preservation in the form of dividends and other income
streams.”
These are the key findings from Escalent’s
Cogent Syndicated Trends in Alternative Investments™ report, which
measures advisor and accredited investor interest in alternatives.
The report examines the rate of adoption of alternative
investments, which alternatives are being favored and accessed,
barriers to use, as well as opinions toward cryptocurrency and the
digital asset marketplace.
One barrier to expansion of alternatives is for
investors to meet the qualifications to be an accredited investor
or qualified purchaser in the category. The SEC requires investors
have $1 million in investable assets to participate, and once they
are admitted there are steep high-investment minimums that make
engaging all the more challenging. The study also found the top
barrier to entry in the category is the lack of liquidity, as many
investments limit investors’ ability to quickly sell without a
substantial loss in value.
REITs continue to be the most popular
alternatives asset class, with almost eight in ten advisors
recommending REITs to their clients. MLPs (Master Limited
Partnerships) and/or commodities and real assets rank second and
third in terms of popularity among advisors. Similarly, investors
are most interested in learning more about REITs, followed by
liquid alternatives, private equity and venture capital.
While advisor use and interest in
cryptocurrencies have declined in 2022, investor ownership has
increased significantly in the past year—from 10% in 2021 to 16% in
2022. Millennials are leading the asset class with half owning
crypto and another 15% planning to purchase.
“While eight in ten affluent investors do not
own crypto and have no interest in doing so, others crave the
opportunity to invest in something outside of the government’s
control,” said William Trout, director of wealth management at
Javelin Strategy & Research, part of the Escalent family. “Many
vehicles fueled by blockchain technology have not come to fruition
as hoped over the past seven years. Some investors remain hopeful
about the potential for improving efficiencies in other industries
but aren’t willing to invest their hard-earned dollars in crypto
amid such great uncertainty.”
To learn more about Trends in Alternative
Investments™, visit escalent.co.
About Trends in Alternative
Investments™
Cogent Syndicated, a division of Escalent, conducted an online
survey of a representative cross section of 512 financial advisors
and 3,321 affluent investors from October 10 through October 24,
2022. Financial advisors participating in the survey were required
to have an active book of business of at least $5 million and be
providing financial advice to individual clients on a fee or
commission basis. Affluent investors participating in the survey
were required to be 18 years or older, have at least $100,000 in
investable assets and be an active participant in financial
decisions for their household. Strict quotas were set during the
data collection period, and post-fielding statistical weighting
(where necessary) was applied. The financial advisor data have a
margin of error of ±4.33% at the 95% confidence level. The affluent
investor data have a margin of error of ±1.7% at the 95% confidence
level. Escalent will supply the exact wording of any survey
question upon request.
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CONTACT: Kim Eberhardt
248.258.2333
keberhardt@identitypr.com