The losses incurred during the 2008 recession continue to prey on investors’ minds as equity markets hit all-time highs again, and they are seeking protection against a similar situation.
Market research firms say a new trend has emerged as a result, with advisers diversifying into alternative assets such as real estate, commodities and mutual funds, away from the stock market, to fit in the cautiousness of their wealthy clients
Michele Giuditta, associate director at Cerulli Associates, a securities-industry consultant says: “Alternative products are attracting interest from retail and institutional investors, as both are increasingly looking for portfolio diversification, enhanced returns and risk management.” A Strategic Insight report by Cerulli says this trend will rise over the next five years.
Many market professionals say they are becoming wary about the bullish stock market, which was recently up by about 20 per cent for the year, hence this move into hard assets and away from equities.
The report, which encompassed a range of research from a $100 million manager to $100 billion-plus managers -with many different investing products- predicts that the use of alternative assets will go from two per cent of total mutual fund assets to 14 per cent over the next decade.
Alternative funds have more than doubled since 2008 and could do so again in the next five years, according to the report, which calculates that the amounts in alternative mutual fund assets would likely go from about $245 billion today to $490 billion in 2018.
Some 71 per cent of asset managers surveyed said diversification and the need to reduce volatility are why they have been moving into alternative investments.
“What we have seen for the last five or six years is what I call a semi-permanent state of investment anxiety,” said Avi Nachmany, executive vice president and director of research at Strategic Insight. According to Nachmany, this state of investment anxiety is the result of many things, including the recent partial government shutdown and the current historically low interest rates.
Such factors have led investors to keep large amounts of assets in cash as well as alternative assets. “It is the result,” Nachmany asserts, “of uncertainty about both the stock and bond markets.”
Source: Cerulli/New York News
