There’s a growing increase in retail investors’ interest in alternative assets but while they may offer diversification and potential returns, they are not for everyone.
Dustin Thackeray, CFA, is the chief investment officer at $2.3 billion AUM firm Crewe Advisors and he’s been telling InvestmentNews why educating clients who are new to alts is essential and why they are not suitable for those prioritizing liquidity.
“There has been much effort from the advisor private fund community to educate investors about alternative asset classes and various alternative investment vehicles,” he said. “This industry has been quite innovative over recent years to deliver a suite of alternative investment vehicles for portfolios of all sizes. There is more work to be done on the investor education part as this will continue to be at the forefront of investing in alternatives.”
One of the vital parts of education is ensuring that clients are aware of the risks, especially as “market volatility during Covid and the years following may have been a catalyst for investors to look for other areas to deploy capital into areas such as alternatives,” added Thackeray.
Retail investors often need liquidity in their investments but this can be challenging for those choosing alts, given a range from investment vehicles offering daily liquid mutual funds and ETFs to private fund offerings that may lock up capital for more than a decade.
“Various equity and fixed-income hedged strategies may be better-suited for more liquidity versus private fund offerings in direct real estate, private equity or venture capital are often more suited to long periods of locked up capital,” explained Thackeray. “There is a middle ground of semi-liquid interval funds or tender offer funds that offer periodic liquidity up to a set level per period. These vehicles span the spectrum of hedged strategy to PE and venture capital. With these vehicles, it’s important to understand the liquidity constraints of the fund and how that may change depending on the market environment.”
For younger investors, alternatives to stocks and bonds are likely to include cryptocurrencies and other digital assets, so how does Thackeray think advisors can enthuse Gen Zs and Millennials about more traditional alts?
“Education on the benefits of diversification among asset classes can be an effective way of displaying how more traditional assets such as REITS, hedge funds, and PE may reduce risk or enhance returns over long periods of time,” he said. “Properly constructing a portfolio of asset classes that exhibit low correlations over various periods of time and rebalancing the portfolio periodically may help investors mitigate some behavioral biases of investing and be more successful over time.”
Chicago-based Mesirow Fiduciary Solutions adds flexPATH's plan-level outsourced fiduciary book, boosting its retirement market reach to $164 billion.
Also, Raymond James's employee advisor channel adds breakaways from Wells Fargo and Stifel, while UBS welcomes an ex-Morgan Stanley duo in Indiana.
It promised guaranteed principal and 10% monthly returns. The SEC says it invested nothing.
Ten years after entering the fee-based annuity market, MassMutual Ascend says nearly half its lifetime sales came in the past two years alone – but barriers remain among fee-only advisors.
Amplify, WealthReach, Zeplyn and Zocks have unveiled partnerships aimed at automating portfolio management, content creation, account opening, and client communication.
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income