Knowing when to turn to liquid alternatives

Jun 5, 2014 @ 12:00 am

Runtime: 2:14

Sandy Bolton, Pershing's managing director of financial solutions, discusses the rise of liquid alternative mutual funds and lays out the different reasons clients might be better suited for liquid or illiquid alternatives.

Video Transcript

[MUSIC] I think after the market disruption of 2008 we saw that many advisors felt that they needed to have an asset in their portfolio that was less correlated to their stock and bond allocation. So, we worked since then to develop offerings around our alternative investment network. As well as our alternative investments that are available for mutual fund platform. The biggest trend that I'm seeing right now in alternative investments is the creation of liquid alternative investment mutual funds. So, the complex strategies are moving downstream. From the traditional illiquid form, into the more liquid mutual fund form. When it comes to balancing the illiquid versus liquid allocation in a client's portfolio, it really comes down to a client's net worth and their need for liquidity within their portfolio. Should they have a need for higher liquidity, then a mutual fund alternative is a better bet. If you look at what traditionally institutions have invested in alternative investments, the allocation has been much higher, closer to 30%. What we're seeing on the Pershing platform is less than 10% allocation to alternative investments. One of the things that we've seen at Pershing, there is a tremendous need for alternative investment education and there's very little available. So we launched our alternative investment center to address that need. And within the alternative investment center we cover both the illiquid alternative and liquid alternatives. And added things such as the screener tool. Added research from Morningstar as well as Blue Ball partners. And really added the ability for them to screen and search for the alternative investments that Pershing custodies on the platform. One of the trends that we're seeing with alternative investments in the illiquid space is the trend toward automation. So what Pershing has done with DTCC's alternative investment platform, and then what Pershing is now doing in creating alternative investment order entry. So really taking a very manual paper based process and making it more automated. Similar to what happened in the mutual fund industry many years ago. [MUSIC]


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