Financial Advisors At Wirehouses Slowly Increasing Alternative Allocations

New York (HedgeCo.Net) – It may be at a snail’s pace, but the latest data suggests that financial advisors at wirehouse firms are slowly increasing their client allocations to alternative investments.

In a report from the Money Management Institute and Dover Financial Research, the latest results show that assets dedicated to alternative investments from wirehouse firms jumped to $205 billion in 2014 and that is up from $172 billion in 2013. One area of concern was the amount dedicated to liquid alternative mutual funds seems to be hitting a plateau when compared to traditional hedge fund and private equity structures.

According to the report, in 2013 the percentage of assets in liquid alts was up to 51.4%, but in 2014 the distribution was basically a 50-50 split between liquid alts and traditional funds.While the total assets in alternatives is growing, it still represents a relatively small portion of the total portfolio structure with the report suggesting that allocations are hovering between 5-10% of the total portfolio.

In an article from, Ed Butowsky from Chapwood Capitla Investment Management was quoted as saying that “anything less than 20% in alternatives is just noise.” Mr. Butowsky went on to say that, “The growth of alts in portfolios is needed and long overdue. If you’re serious about managing risk in your clients’ portfolios, then the percentage to alternatives needs to be at least 20%, and anything lower than that means you haven’t been taught how to manage money or you have elected to ignore the irrefutable facts of portfolio management.”

Rick Pendergraft
Research Analyst

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