Challenges and Opportunities in Alternative Investments: Insights from Fidelity Studies
Title: Fidelity Studies Highlight Obstacles in Adoption of Alternative Investments
In a series of recent studies, Fidelity has found that financial advisers face significant challenges in evaluating and incorporating alternative investments into their clients’ portfolios. The studies revealed that only 26% of financial advisers currently have exposure to alternative products, in stark contrast to the 86% of institutional investors who do.
One of the main obstacles identified by advisers is the lack of resources for effectively evaluating alternative investment opportunities. As alternative investment strategies continue to evolve rapidly, advisers are seeking additional research and due diligence to make informed decisions. According to Fidelity’s findings in 2021, more than 54% of advisers cited investment manager research as the main reason for considering or expanding their usage of alternative investments.
Specific challenges highlighted by advisers include due diligence on underlying strategies and managers, as well as difficulties in communicating the investment strategy to clients. In response to these challenges, Fidelity has announced the expansion of its research offerings to include research notes on third-party registered alternative investment strategies. This new resource, available through Wealthscape, Fidelity’s platform for advisers, aims to provide advisers with the tools they need to excel in the alternative investments space.
Darby Nielson, CIO of Fidelity’s institutional group, emphasized the importance of personalized allocations when considering alternative investments. Nielson stated that advisers should tailor their recommendations based on the investor’s time horizon, liquidity needs, and eligibility for different alternative structures.
Despite the hurdles identified in the studies, there is a growing trend among financial advisers to increase client portfolio exposure to alternative asset classes. According to a survey conducted by CAIS-Mercer, 85% of financial advisers expect to boost allocations to alternative investments in 2024. The survey also revealed that 62% of advisers already allocate between 6 and 25% of their clients’ portfolios to alternatives.
Overall, the Fidelity studies underscore the need for advisers to have access to comprehensive research and resources to navigate the complexities of alternative investments effectively. As the landscape of alternative investments continues to evolve, advisers must stay informed and equipped to make informed decisions for their clients’ financial goals.
