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Surveyed Advisors Tout Benefits Of Alt Investments


More retail investors should have access to alternative investments, according to a survey of financial professionals conducted by an alternative investment platform firm.

The major stumbling blocks for retail investors to enter the field are regulatory barriers that prevent them from investing in alternatives and a lack of knowledge about the category, according to the survey conducted of 303 financial professionals by CAIS, an alternative investment platform based in New York City.

“Market volatility, interest rate hikes, and a growing lack of confidence in strong returns across public markets have prompted a surge in demand for, and access to, alternative asset classes,” the survey report said. Respondents to the survey included 107 financial advisors, plus RIAs and other investment industry experts.

Eighty-one percent of respondents said they think all retail investors should have access to alternative investments. Almost three-quarters of respondents said the Securities and Exchange Commission’s definition of who qualifies as an accredited investor needs to be updated. Among them, 44% said the definition is too rigid and 41% said the income threshold for individuals should be lowered. Only 11.5% believe the definition is too lax, the survey said. Only accredited investors are allowed to invest in many alternatives.

Public market assets have generated some of the lowest annual performances for the 60/40 portfolio in the last 20 years. One third of the survey participants said the traditional mix of stocks and bonds is no longer effective for investing, and an additional 42% said the 60/40 portfolio is not as effective as it used to be.

Among the respondents who identified themselves as investment or financial advisors, 84% said they are recommending that clients who meet accredited investor requirements should allocate some resources to alternatives.

“As traditional assets face muted expectations, alternative investments may provide a diversified method for investors looking to hedge against increased volatility who want potential enhanced returns,” Matt Brown, CEO and founder of CAIS, said in a statement. We feel there is “a growing urgency for access to alternative products.”

In addition to investment regulations, another barrier to the use of alternatives is a lack of education on the part of advisors and investors about the category. Respondents also said the added administrative requirements and paperwork create an obstacle to investments, as do concerns about meeting due diligence and compliance processes.

Survey respondents said they feel private equity, real estate and private credit are the three alternative asset classes most likely to outperform the market in 2022. Alternative assets are expected to make up to 24% of the global investable market by 2025, up from 12% in 2018, CAIS said.


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