AUTHOR: Bank of America Alternative Investment Solutions.

WHAT IT IS: A study of high-net- worth investors' attitudes toward alternative investments.

METHODOLOGY: BofA surveyed 403 U.S. high-net-worth investors with average investable assets of $7.9 million (30% had $3 million to $9 million; 40% had $5 million to $9.9 million; 30% had more than $10 million). More than six in 10 (66.3%) invest in alternatives.

MAJOR FINDINGS: High-net-worth individuals not currently invested in alternatives are three times as likely to think they will lose money in hedge funds than they are to believe Medicare or Social Security will run out, the Survey of Attitudes Toward Alternative Investments reports. But more than half (57%) of hedge fund investors are satisfied with the performance of their alternative investments—only 5% were dissatisfied.

Individuals invested in alternatives see a much higher risk associated with hedge funds, financial derivatives, venture capital, private equity and REITs than with stocks, bonds and money market funds. This is statistically untrue, says David R. Bailin, president of alternative investment solutions at Bank of America.

Nearly 60% of investors are more comfortable with alternative investment managers who must comply with the SEC—almost half of hedge fund investors agree. More than 20% of HNW investors do not use a professional advisor, though only 8% of those invested in hedge funds go it alone. In fact, 56% of hedge fund investors say they choose to invest in these vehicles because they trust that their advisor's understanding of the products is comprehensive enough to make good recommendations. More than six in 10 hedge fund investors believe advisors' recommendations of hedge funds are in the investors' best interest—not the advisors'.

Interestingly, while one-third of those invested in alternatives worry about losing more money than they can afford in hedge funds, 55% of hedge fund investors remain confident in their investment decisions.

THE AUTHOR SAYS: "Alternative investors think they're much riskier than traditional investments. First, statistically, they're not," Bailin says. "But for advisors, this perceived risk is an opportunity. What makes the client comfortable is the advice they get, and since alternatives are less risky than investors think, by providing the data and analysis that proves it, the advisor develops a closer relationship with the client."