Asset managers predict alternative mutual funds to make up 9.7% of mutual fund assets in five years, and rise further to 15.8% of assets in 10 years, according to new research by Cerulli Associates.
Specifically, Cerull’s ETFs and Retail Alternative Products and Strategies 2012 report found that one-third of managers in the retail channel rate alternative investments as their most important initiative, with another 44% rating it as more important than most initiatives.
“We expect alternative mutual fund asset growth to continue, but due to the overall size of the mutual fund market ($8 trillion), it may be a slow climb to represent more significant marketshare,” stated Matt Pickering, analyst and contributor to Cerulli’s annual study of alternatives and ETFs.
Alec Papazian, senior analyst and lead author of the research, added that as the use of alternative mutual funds grows, industry participants will likely dig deeper to explore other facets of the space. “For example, commodities are often discussed separately from the wider alternative universe given their overall size and penetration in the market compared to other alternative categories,” she said.
“Morningstar currently classifies commodities as an asset class separate from alternatives. Moreover, alternative categories will likely have different rates of success, and some will possibly decline (i.e., 130/30 funds have due to poor performance in past years). This fracturing in the market may change how managers discuss alternatives, as well as educate advisors and investors on their products.”