Retail investors are becoming more open to the idea of investing in non-traditional asset classes, such as hedge funds, according to a new study from Natixis Global Asset Management, the world's thirteenth largest asset manager.
Nearly 69% of individual investors agree that it is time to replace traditional techniques with new approaches, while 46% say they regularly consider whether an investment will generate returns that are uncorrelated to the markets.
John Hailer, chief executive officer of Natixis in the Americas and Asia, said that the study reveals that investors “would like to try new ways of investing, but they would also like to sleep at night.” He said that there are strategies available which would both manage risk and create a durable portfolio, “but investors don't yet know enough about them."
Although more than half of investors (52%) say they are interested in investment products that are unrelated to the performance of the broader markets, only two in five (39%) currently invest in alternative investments.
The biggest barrier to participation in alternative investments is a lack of knowledge.
Approximately 68% of investors say they invest only in products they understand, and 48% say they have little or no understanding of alternative investments. Nearly two-thirds of those polled say they need to learn more about alternatives before they would consider investing in them.
The study shows that financial advisers are well-positioned to help investors become comfortable with alternative investments and other new strategies. Half of investors said they would consider alternative investments for their portfolios if their advisers recommended them. However, only 35% of investors say they have discussed alternatives with their advisers.
"Building a durable portfolio is not only about capital allocation; it's also about risk allocation. Investors need to start by looking at potential risks embedded in their existing equity and fixed income investments, and then consider strategies such as alternative investments - including hedging strategies, commodities, currencies and managed futures - to control volatility while still having the ability to achieve their goals for returns," said Hailer.
The Natixis Global Asset Management survey of 702 individual investors was conducted in May and June. Natixis is headquartered in Paris and Boston and has assets under management totaling $711 billion.