Firms heed call of alternative investments

The appeal of alternative-investment strategies is becoming increasing apparent to traditional money management firms trying to capture a piece of that market, according to the latest research from Cerulli Associates Inc. in Boston. Attracting investors and retaining talent are seen as the leading drivers behind the transition into the alternatives space for most money management firms, according to Benjamin Poor, director of Cerulli and author of “Best Practices for Portfolio Management Organizations,” released this week. “Some firms have approached the product development toward alternatives as part of a vision of the future, but others have been driven in this direction after seeing some of their talented managers leave to run hedge funds,” he said. The research included a survey of executives from 30 traditional money management firms. One of the key takeaways, according to Mr. Poor, was the importance of openly addressing issues related to the appeal of alternative strategies with portfolio managers. “This is a discussion that firms need to have,” he said. Respondents ranked investment freedom and compensation equally as the leading factors driving the migration of portfolio managers to hedge funds from traditional firms. Entrepreneurial drive ranked third, followed by the status that comes with star power and a desire to manage smaller portfolios.