Despite the market decline, high net worth investors have maintained a steady interest in alternative investments. A report issued by Chicago-based Spectrem Group, "The Boom in Alternative Investments: Reaching the High Net Worth Investor," details the characteristics and investing habits of "alternative investors."
Approximately one out of five investors with a net worth over $5 million puts money into alternatives investments, including venture capital, private equity, and hedge funds. Alternative investors are both younger and richer on average, with twice the assets and three time the income of traditional investors.
The most popular non-traditional investments among the group are venture capital and private equity. According to the study, hedge funds have not caught on because they are poorly understood and are primarily used only by those in the upper echelons of wealth; among investors with more than $25 million, 20% invest in hedge funds, maintaining an average balance of $2.7 million.
The study discovered that alternative investors rely heavily on financial advisors but require a higher degree of sophistication in advice and expect a more collaborative relationship.