Affluent Investors Use Alternatives to Guard Against Risk

Although equity markets may have hit all-time highs, the investment community has not forgotten the meltdown in 2008 that resulted in a stunning 40 percent loss, and as such many are asking their money mangers and investment advisers to help protect their wealth against another fallout. In response, fund managers are shifting their client's assets away from the "bubble-prone" stock market and into alternative assets, like real estate, commodities and shipping container investments; that have repeatedly demonstrated that they can accommodate for stock and bond market risks.

"Alternative products are attracting interest from retail and institutional investors, as both are increasingly looking for portfolio diversification, enhanced returns and risk management,"- Associate Director at Cerulli Associates.

In fact, a research study by Strategic Insight reported that the most important reason for the recent move away from stocks by affluent asset managers, has been the need to "diversify their investment holdings; so as to protect their clients' assets." Moreover, the study also concluded that the amount of money invested in alternative (or nontraditional) investments, particularly those offerings that have little or no correlation to the stock or bond market, will rise considerably over the next five years.

"Alternative funds have more than doubled since 2008 and could do so again in the next five years,"- The Strategic Insight Report.

The study by Strategic Insight also forecast that the use of alternative assets will go from 2 per cent of total mutual fund assets to 14 per cent over the next decade, with the amounts in alternative mutual fund assets likely growing from approximately $245 billion currently, to $490 billion in 2018.

Whether the immediate state of investment anxiety is the result of the recent U.S. government shutdown and/or the historically low interest rates, investors are choosing to keep large amounts of cash as well as alternative assets. In doing so, investors can avoid the uncertainty of the world's stock and bond markets and stay ahead of rising inflation.