Five Key Findings from the Alternative Investment Summit

Intelligent Partnership‘s Daniel Kiernan tells us about the 5 key findings from the Alternative Investment Summit 2013.

I thought I would quickly post some of the key findings that came out of the Alternative Investment Summit we hosted for advisers at the Barbican centre last week.

It was a fantastic day with over 200 delegates attending, some great panel sessions and a Q&A with the FCA – not something you get every day of the week! David Stevenson was a superb host and managed to draw out some real insights from the panellists.

Here are the key findings as I see them:

Key Finding #1  The investment thesis is sound

All of the panellists and speakers, and all of the advisers I chatted to on the day, agreed that the additional sources of diversification and yield that alternatives provide are important. Everyone agreed – in theory at least – that alternatives should play a part in every portfolio.

Key Finding #2  Putting theory into practice is challenging for advisers

I sensed that the two big obstacles preventing advisers from recommending alternatives for their clients were obtaining whole-of-market knowledge and the risk/reward ratio for the financial adviser. Because alternatives are often lightly regulated and illiquid, and because they are by definition outside of the mainstream, there is a lot of regulatory risk on financial advisers who recommend them – often for what will inevitably be a small portion of client’s portfolios.

Key Finding #3  They are better suited to HNW and sophisticated clients

Clients with smaller portfolios and less capacity for loss should stick to mainstream investments to build their wealth. Alternative investments come in later, as a diversification tool. There wasn’t any consensus on just when the appropriate point to introduce alternatives was though  – feeling was that decision had to be made on a case-by-case basis and advisers had to look at both the client and the alternative investment they were considering.

Key Finding #4  Small concentrations

With the exception of Rockpool boss Nicola Horlick, who revealed that she has 100% allocation to alternatives (but then she clearly fits the definition of HNW and sophisticated!)  most people agreed that 10-20% is a sensible allocation.

Key Finding #5  Not all alternatives are alike

The alternative investment universe is huge with a myriad of different investment opportunities, into different assets, accessed using different structures, with different levels of liquidity, risk and return.  This is both a challenge (how do you get your arms around it all?) and an opportunity (there are some real gems in there)….



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