The typical balanced, or middle risk client portfolio should contain some alternative assets, according to the majority of advisers who responded to the latest FTAdviser survey.
The survey, which was conducted via the FTAdviser Twitter account, found that 59 per cent of respondents view alternative assets as having a role in a balanced portfolio, while 41 per cent disagreed.
Government bonds trading at very high valuations at the same time as many equity markets are trading at close to record levels has created the problem of diversification for advisers and clients.
Alternative assets covers a wide range of potential investments, from alternative income products, such as music royalty investment trusts and infrastructure funds - which are predominantly viewed as alternative sources of income and as a potential replacement for bonds - to hedge fund strategies and absolute return funds, which aim to deliver returns which are not correlated with the performance of the wider market or economy.
A subset of these types of funds are long/short equity strategies which attempt to own the shares which they think will go up, but also have short positions on shares they think will fall. Such strategies will generally aim to perform better than a standard equity fund in times of market stress.
The final category of alternative assets, such gold and other commodities, tend to perform well in times of sharply rising inflation.
david.thorpe@ft.com
