A research by Cerulli about the projected growth of the alternative mutual fund space is sure to be music to alternative mutual fund shops ears.
The research found that asset managers expect that alternative mutual funds will comprise of more than 15% of all mutual funds in 10 years. The leading driver behind managers’ interest in alternatives hinges on investors’ need to optimize the risk-adjusted performance of their portfolios. Another significant driver is managers’ expectations regarding future capital markets returns. Volatility and uncertainty is viewed by many managers as benefiting alternative investing.
“Interestingly, the need to differentiate in a competitive marketplace was the leading driver in 2011, and is considered much less of a driver in today’s market,” stated Alec Papazian, senior analyst in Cerulli’s retail asset management practice, and lead author of this research.
“We attribute this to the fact that so many managers now offer these strategies. 2011 was a record year for alternative mutual fund product development with 95 new funds being launched.”
However, the research also revealed that distribution access and advisor knowledge are the largest challenges facing alternative managers.