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Report finds low use of alternative products among financial advisors

On Behalf of | Dec 5, 2023 | Firm News

A new report examines the utilization of alternative strategies and vehicle structures by financial advisors, reports InvestmentNews.

The analysis was contained in the Fuse Research Network’s Advisor Trend Monitor Series Report.  It found that while some advisors have embraced emerging structures such as interval funds and business development companies (BDCs), they are still being used by a relatively small segment of the industry.

Mike Evans, director of benchmark research at Fuse, was quoted as saying, “The overall usage of emerging structures like interval funds and BDCs is limited. This trend is also true for hedge funds, private equity, and private debt.”

According to the research conducted by Fuse, 31% of advisors surveyed are using real estate investment trusts in their client portfolios with an average allocation of 5%.  Private equity and hedge funds were the only other structures being used by at least one in ten advisors.

BDCs, closed-end funds that provide financing to small and midsize private companies, are utilized by 9.7% of advisors, the survey found.  The average allocation in portfolios was 3.9%.  8.6% of advisors use private debt in client portfolios, while 7.4% use interval or tender offer funds.

Evans noted what he called the highly favorable demographics of advisors using alternative structures, citing their experience, client lists, and team structures, while adding, “Firms must take a deliberate approach with any alternative vehicles because the sales cycle will be significantly longer.”

FUSE Research Network annually produces a series of research reports designed to explore advisor views on critical topics that are of specific interest to the asset management community, with each report surveying the views of 700-1000 advisors to provide insights for asset management firms on what advisors are thinking.

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