This is What Advisers Look For in Alternative Investments

Alternative investments, a relatively new asset class for investors to consider, has been steadily growing in demand since 2008. Essentially, alternative investments are asset classes that do not correlate with traditional assets such as stocks, bonds and real estate. They typically follow their own cycles and as a result, introducing alternative asset classes could potentially help volatility in investment holdings by reducing the overall exposure to risks, especially when traditional asset classes are performing poorly. Subsequently, investment advisers and wealth managers have been paying much closer attention to this asset class, particularly as their investor clients become increasingly apprehensive about traditional investment offerings; in a sluggish global economy.

Moreover, a recent (2013) analysis conducted by Franklin Square Capital Partners revealed that advisers prefer alternative-investment providers with a high level of integrity and transparency, with 92% ranking that factor as one of the top three most important criteria considered, when selecting a provider. In addition, more than 90% also said strong, consistent performance that offered steady investment returns was another essential characteristic. Another essential factor advisers look for in the alternative asset class is competitive pricing, and a product's correlation to other asset classes. Additionally, the survey revealed thirty-eight percent of the advisers said that they would choose a provider based on the liquidity of the product. These factors advisers consider when investing into alternatives are typically characteristics that investors are seeking due to the volatility and tough conditions of the financial markets.

Historically, the most profitable alternative investments have been an investment secret of high-net worth and institutional investors, but nowadays they are far more available to an eager international investment community. Alternative investments range from private equity to hedge funds to commodities to antiques and can complement a variety of investing strategies. The most important aspect to recognize, is that alternative investments are designed to complement a well-founded portfolio, rather than to serve as the focal point.