Previously, we expressed our view on the growing importance of alternative mutual funds in advisor directed portfolios. Findings of the recent Morningstar and Barron’s 2012 Alternative Investment Survey of U.S. Institutions and Financial Advisors further support the position of our Optima Group consulting practice.
Nearly half of the advisors surveyed for the study expect annual growth in alternatives usage to exceed 11% for the next five years and 56% considered alternative investments at least as important — or more –than traditional investments. And, for most alternative strategies, advisors far and away select mutual funds as their vehicle of choice.
However, both Optima Group findings and the Alternative Investment Survey confirm that for alternative mutual funds to sustain growth they must continue to meet advisors’ primary needs for diversification and enhanced risk-adjusted returns. Also of importance, they must keep fees within attractive ranges relative to standalone hedge funds and alternative ETF options.