Advisers look to alternatives

Morethan three quarters of independent financial advisers responding to an industry surveyhave indicated their intent to significantly increase levels of client portfolio exposure to alternative assets over the next few years.

The findings, stemming from research of 300 non-aligned advisers conducted by Macquarie Bank, reveals 78 per cent of respondents specified their intent to allocate more client monies to alternative or structured investments over the next two to three years.

Commodities, direct property and infrastructure were all ranked highest in terms of what advisers are seeking greater exposure to, with diversification and capital growth the two leading motivations for increasing exposure to alternatives.

While advisers are keen to boost their allocations to the asset area, the research notes this will be coming from a low base of current investments and should therefore be viewed in context.

The survey also suggests that structured products are gaining in favour due to their lower management fee levels in comparison to ‘vanilla’ managed funds, and their ability to offer absolute returns over returns relative to benchmarks.

On the downside, advisers were apprehensive about their inherent closed-end and illiquid nature, pointing to the fact that many struggled to incorporate new products into existing client portfolios within the specified limited ‘open’ period.

Other negatives cited were poor understanding of alternative products, lack of research house coverage and low availability on wrap services.

Macquarie financial services group division director Craig Swanger says advisers were told from the outset the term ‘alternative assets’ includes private equity, infrastructure, hedge funds, commodities, currencies and direct real estate.