Most Advisors Now Using "Alternative" Asset Classes For Limited Allocations, Cogent Says

Wednesday, August 31, 2011 08:03
Most Advisors Now Using

Four out of five advisors are now using formerly exotic investments to further diversify their clients' portfolios, Boston research firm Cogent has discovered.

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Independent brokers lean most heavily on venture capital, private equity, and hedge fund units, Cogent says, while RIAs are still fond of notes and other structured products.


The average firm-wide allocation to alternative assets is 11%, which means traditional stock- and bond-oriented mutual funds and ETFs -- and individual securities -- are still king.


Of course, mutual funds and ETFs can also invest in private equity and other asset classes.


If anything, a full 41% of all the advisors out there say they're still expanding their use of ETFs as the way into exotic alternatives, while direct placements are only catching on with maybe 10% of the industry.


Education is key.


Half the advisors who aren't using these asset classes say their own lack of knowledge about how they work is holding them back, while another 40% of the industry says their clients have yet to learn enough to make these assets a viable fit.


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