A significant majority of high net worth and institutional investors plan to increase their allocation to alternative funds in 2015, according to a survey conducted by Altegris Advisors.
Findings of the Altegris Investor Survey, conducted at the Strategic Investment Conference, hosted by Altegris and Mauldin Economics, revealed that 66 per cent of respondents plan to increase their allocation to alternatives during the second half of 2015 – of which managed futures/global macro (32 per cent) and private equity (28 per cent) ranked as the top asset classes for increasing. Registered Investment Advisers (45 per cent) and Private Investors (31 per cent) put managed futures/global macro at the top of their list, while Institutions (36 per cent) put Private Equity at the top. More than half of respondents (59 per cent) said that alternative allocations should represent 10-25 per cent of a diversified portfolio, while 15 per cent thought the number should be between 25 and 50 per cent. Only 23 per cent believe the allocation should be less than 10 per cent.
"Our annual Strategic Investment Conference opens a dialogue of global markets, economics, and technology discussions to a group of sophisticated investors over the course of three days," says Jack Rivkin, Chief Executive Officer and Chief Investment Officer of Altegris Advisors. "The findings of the Altegris Investment Survey represents a key indication of the role various alternative classes are increasingly playing in portfolios."
When asked how investors are using alternatives in their portfolios, an overwhelming majority of respondents (63 per cent) noted they use alternatives to complement traditional strategies, 17 per cent use alternatives as a substitute for traditional stock strategies, and 15 per cent use alternatives to hedge against volatility in the market. Of particular interest, 60 per cent of respondents indicated that clarity regarding investment philosophy/strategy is the most important attribute to choosing an alternative fund. Only 19 per cent selected historical returns as most important, 24 per cent indicated that lack of clarity regarding investment philosophy/strategy was a major concern regarding investing in alternatives, and 53 per cent expressed concerns about fees.
"While investors are beginning to see the value of alternatives in a portfolio, the industry still has work to do to ensure that clients understand the role and net return characteristics of specific alternative strategies," says Matt Osborne, Co-President, Head of Marketing and Business Development at Altegris Advisors. "This is particularly the case as more alternative strategies, such as private equity, become available to a wider audience of qualified investors."
