Alternative assets and exchange traded funds continue to draw a greater following as advisors and institutional investors turn toward other asset classes and strategies to further diversify their investment portfolios.
According to a Barron’s and Morningstar report on alternative investments, alternative funds attracted $23.2 billion in 2011, or $14.2 billion excluding nontraditional bond category, whereas U.S. equity funds lost $84.7 billion. [ETFs for ‘Alternative’ Asset Classes]
Managed futures and currency funds added $3.6 billion and $3.4 billion, respectively, in 2011, even though managed futures declined 6.9% over the year and currency funds continued lost out every year since 2008.
“Institutional investors and financial advisors have significantly expanded their alternative holdings since the 2008 crash, and continue to view alternative investments as an important part of their portfolios,” Scott Burns, director of ETF, closed-end fund, and alternative research for Morningstar, said in a press release.
Advisors and institutions note diversification as the key driver for alternative investments. However, high fees and low liquidity may be holding back any further growth in the investment area.
Nevertheless, inflows are beginning to slow, with only $11.6 billion in new alternative ETF inflows for 2011, the lowest since 2006. Alternative mutual fund inflows were $1.8 lower year-over-year.