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A recent series of Fidelity studies found that proper valuation remains a major barrier to the introduction of alternative products, with only 26% of financial advisors currently having exposure to alternative investments, compared to institutional Households account for 86%.
The firm has found that as alternative investment strategies rapidly evolve, advisors are seeking additional resources to effectively evaluate these opportunities before recommending alternatives to clients. Fidelity found in 2021 that more than 54% of advisors highlighted investment manager research as a primary reason for starting or expanding their use of alternative investments.
Advisers identified the underlying strategy and manager due diligence as barriers to investing in alternative investments, particularly those offering intermittent liquidity (53%) and illiquidity (55%). I focused on the issue. In another 2023 study, more than half of advisors said they had difficulty communicating investment strategies to clients when working with alternative investments.
With this in mind, Fidelity has announced an expansion of its research services to include third-party registered research notes. Alternative investment strategies. The Alternative Investment Research Portal, available through Fidelity’s advisor platform, Wealscape, allows advisors to review research on a variety of private credit, private real estate, and private equity funds.
“While alternative investments are becoming more widely available, many advisors are incorporating them into their portfolios,” Darby Nielson, chief information officer of Fidelity’s institutional investors group, said in a statement. “We don’t have the resources to decide how.” “Fidelity is committed to helping investors achieve their financial goals by providing advisors with the tools and resources they need to make informed decisions and excel in alternatives. I am.”
It should be personalized, Neilson said in a video posted on Fidelity’s website about what allocations advisors should consider as alternatives.
“The first thing I’d say is it’s up to the investor,” Neilson said. “It depends on the investor’s time horizon, liquidity needs and eligibility for various alternative structures.”
Such personalization requires advisors to understand the nuances of the options available to them and highlights the need for additional research.
Meanwhile, another study by CAIS-Mercer, in the latest edition of its annual Alternative Investment Survey, found that there are some hurdles to alternative investing; Financial advisors are very likely to increase the exposure of their clients’ portfolios to alternative investments.
A survey of 260 financial advisors found that 85% plan to increase their allocation to alternative asset classes in 2024, as measured by CAIS Capital LLC, a firm that connects advisors to alternative asset managers, and Mercer, a Marsh McLennan-owned consultancy. They answered that they expected the number to increase. According to the survey, 62% of advisors in this group already allocate between 6% and 25% of their clients’ portfolios to alternatives.
Fidelity studies referenced include the June 2023 “Fidelity Study on Allocations to Alternative Investments by Institutions and Financial Advisors.” From “Alternative Investment Survey” April 2021. and “Alternative Investment Research” from October 2023.
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