liquid assetsIn a highly interesting story, Jill Cornfield reports that “alternative assets skyrocketed over six years, from $83 billion at the end of 2008, to $304 billion in mid-2014, according to Strategic Insight.” In other excerpts from the article:

“In the ‘Alternatives Industry Analysis 2014’, Strategic Insight, an Asset International company, reports that registered alternative assets surpassed 2% of all mutual fund and exchange-traded product assets last year. Strategic Insight projects continued growth for the next five years, at an average annual clip of almost 20%. The report contends that the biggest single driver of demand for alternatives is volatility management and, therefore, capital protection for retirees.

“Advisers are helping to drive interest in liquid alternatives, according to the report. One-quarter of investors (25%) points to the advice of a financial adviser as spurring them to begin investing in liquid alternatives, well ahead of any other single factor. Advisers and investors turn to alts for different reasons: About half of advisers (52%) cite portfolio diversification as the primary reason they use liquid alts. Conversely, the top reason for investors to use alternatives was income (41%).

“Registered independent advisers (RIAs) are the channel with the largest assets as of the second quarter of 2014, but recent activity suggests that wirehouse home offices and gatekeepers are increasing their support of alts.

“A section on the growth of the alternatives universe reviews the evolution and expansion of the liquid alternatives industry, defines Strategic Insight’s 12 categories of products, and breaks down the historic growth of alts by category and product type.

“Nearly half of consumers (49%) say they still don’t understand this investment class, and one-third say that alternatives seem risky. However, fewer investors (32%) expressed low confidence in the product, a considerable improvement from 50% in 2013. Slightly more than a third (37%) of all investors say growth of capital is their main investment priority, but 33% of high-end investors say they are concerned primarily about capital preservation. Among less-affluent general investors, 30% indicate their top priority is income production.”