- Distributors and retail investors at odds on liquid alternatives
- Wealth managers are upbeat on liquid alternative products that are based on long-short or global macro strategies
- Retail investment preference lies in cash and deposits
There is an emerging trend among distributors of pairing multi-asset strategies, for regular income, with liquid alternatives to achieve additional returns.
For instance, banks are advising liquid alternatives to retail investors, which was once targeted at high-net-worth individuals (HNWIs) by certain banks. At a small-to-mid-sized Asian private bank, the advised allocation to liquid alternatives was 20%, while another global/regional bank's recommendation was 40% for mass affluent clients.
Wealth managers are upbeat on liquid alternative products that are based on long-short or global macro strategies as they believe these strategies can provide investors returns that are uncorrelated to traditional asset classes. Structured products with option strategies as an income-generating idea are also often advised by wealth managers to investors with higher risk appetites.
However, according to a survey conducted for The Cerulli Report - Wealth Management in Asia 2016, retail investors in Asia may not be ready for liquid alternatives just yet.
The survey reveals that the appetite for such products remains low, as investment preference lies in cash and deposits, even as investors wish for 3% to 5% higher returns than their respective country's one-year deposit rates and cite portfolio diversification as their top priority.
While Asian investors seem to adopt a cautious approach to their investments, Cerulli notes that a lot of convincing needs to be done by asset managers and distributors.