Author: Chris Andraca
This insight was reported in a new study from Cerulli Associates called “U.S. Alternative Products & Strategies 2016: The Multiple Roles of Alternative Investments.”
Our team at BaseVenture is dedicated to helping simplify and automate how alternative investments are administered and managed. We were very encouraged to read about the increasingly critical profile that alternative investments are taking in the investing “toolkit”.
Increasing demand will place more pressure on improving the efficiency with which alternative investments are administered & managed. And that is exactly where BaseVenture helps our fund administrator, fund manager, and private bank clients.
A significant amount of money is flowing into alternative assets. According to Cerulli, this exceeded $7.5 trillion at the end of 2015. In fact, we’ve seen other studies that report that money invested in private funds will grow to $18 trillion by 2020.
The quote that we think best sums up the report is:
“Expectations regarding future capital market returns and the need to optimize risk-adjusted performance are the leading drivers of investors’ interest in alternatives,” explains Michele Giuditta, associate director at Cerulli. “With equity and bond valuations stretched, the potential diversification benefits and alpha provided by alternatives appear favorable on a relative value basis.”
Thanks in part to the desire for greater performance and diversification, alternative investments are gaining an increasing influence among both investors and advisors.
According to the report, alternative investments are forecast to grow to 5.3% in 2 years, 7.8% in five years, and 11.7% in 10 years. Open-ended mutual funds are the most widely used vehicle in which to “wrap” alternative investments.
Investors are more aware and interested in alternative investments. Cerulli reports that 40%+ of managers received multiple requests for alternative investment products over the past few months.
That said, there is still plenty of more room to grow. According to Cerulli, the mean allocation of alternative investments is still less than 5% of overall assets. Depending on the source, we’ve read that the ideal allocation of alternative assets should be in the 15% – 25% range.
Both 401K Specialist, as well as Plan Sponsor wrote great articles summarizing the Cerulli report. The report itself is available for purchase at Cerulli’s site.
Learn more about us at www.baseventure.com
Source: Unless otherwise cited, all quotes and metrics included in this blog post were taken from the “ U.S. Alternative Products & Strategies 2016: The Multiple Roles of Alternative Investments” report via the articles by 401K Specialist & Plan Sponsor