RIAs dive deeper into alternatives, brokers still testing the waters: Survey

Registered investment advisers are using alternative investments in their clients' portfolios at a considerably higher clip than brokers, according to the results of a survey released today by Rydex Distributors Inc. and Securities Global Investors LLC. While virtually all registered investment advisers and brokers surveyed (about 95%) use alternative investments, RIAs tend to weight their clients' assets more heavily toward non-traditional investment vehicles: More than a quarter (27%) of advisers surveyed invest at least 21% of client portfolios in alternatives, while 41% allocate between 1% and 10%. That compares with brokers, a majority of whom (65%) place 10% or less of their client portfolios in alternative investments. For both advisers and brokers, the top three most popular alternative strategies now are real estate, commodities and absolute return. Advisers said they would like to explore further investment possibilities in commodities, absolute return and real estate investment trusts, and brokers said they are interested in absolute return, currencies and commodities. Both advisers and brokers are starting with what they already know in the alternative area, said Sanjay Yodh, managing director, alternative strategies, at Rydex/SGI. “It's what they're familiar with,” Mr. Yodh said at a press event in New York today that detailed the results of the survey. “We're going to be expanding their menu of options.” Rydex/SGI conducted the survey as part of its strategy to develop its own alternative business. The firm saw alternative assets under management increase 25% last year to $5.4 billion, out of a total $21 billion, and is implementing an educational marketing campaign to increase that amount. Last summer, for example, SGI introduced a long/short commodities product, the Rydex/SGI Long/Short Commodities Strategy Fund (RYLFX), which according to Richard Goldman, chief executive of SGI, quickly gained $100 million in assets. Its Rydex/SGI Managed Futures Strategy Fund (RYMFX), which was launched in 2007, now has $2 billion. The survey was conducted in November and December of last year by marketing research firm Amplitude Research Inc., which is not affiliated with Rydex/SGI. The survey captured responses from 100 registered investment advisers, 94 independent brokers and 97 wirehouse brokers for a total of 291. The RIAs surveyed had assets under management of more than $100 million.