For financial and investment professionals, learning first may be the key to realizing full potential of quality strategies
A recent independent study performed by CAIS during the 2022 Morningstar Conference found that demand for and access to alternative asset classes have increased as a result of market volatility, interest rate increases, and an increasing lack of trust in solid returns across public markets.
In addition, over eight in 10 (80.9%) financial industry experts think that all retail investors need to have access to such products.
More than a third of survey respondents (33.6%) think the traditional mix of stocks and bonds is no longer effective for investing, and a further 42% think the 60/40 portfolio is no longer sustainable as it once was. Public market assets have produced some of the lowest annual performances for the 60/40 portfolio in the last 20 years.
Meanwhile, 84% of those who self-identified as financial or investment advisors in the survey report that they are advising customers to allocate to alternatives if they fit the criteria for accredited investors.
“As traditional assets face muted expectations, alternative investments may provide a diversified method for investors looking to hedge against increased volatility and potential enhanced returns,” said Matt Brown, CEO and Founder of CAIS.
“These survey results validate our conversations with the independent wealth management community, highlighting a growing urgency for access to alternative products. CAIS is answering that call by providing the connectivity and education that advisors can use to meet this demand,” Brown added.
At the premier annual conference in Chicago, the study gathered opinions from more than 300 registered investment advisors, financial advisors, and other investment industry specialists.
Its results also indicate that the notion of an accredited investor, a long-standing threshold into alternative asset classes, is under revision across the board in the sector.
The majority of respondents (74.9%) think that the SEC's definition of an accredited investor needs to be updated. Among them, 43.6% think the criteria is too strict and 41.4% say the income cutoff for individuals should be decreased. Only 11.5% of people think the term is overly loose.
Participants feel that there are other barriers investors must overcome to gain access to alternative asset classes in addition to strict requirements.
A barrier to investing in alternatives, according to nearly seven in ten respondents (68.98%), is a lack of knowledge about them.
Concerns about due diligence and compliance procedures (34.3%) and a high amount of administration and paperwork (37.6%) were also mentioned by respondents as challenges in allocating resources.
The three alternative asset classes that respondents to the survey think have the greatest chance of outperforming the market in 2022 are private equity (49.8%), real estate (38.9%), and private credit (33%)
By 2025, the worldwide investable market is projected to contain up to 24% alternative assets, up from 12% in 2018.
