The majority of advisers agree that alternatives are an important consideration for retail investors, as new research from Seneca Investment Managers finds 96% believe they are an important part of overall client asset allocation.

The survey findings tie in with the view of BlackRock’s global head of alternative investments, Edwin Conway, who last year stated that ordinary investors will increase their alternatives allocation from 3% to 25%.

The 202 advisers surveyed by Seneca IM cited a range of reasons for the positive momentum of alternatives in portfolios, including 58% believing the asset class to be a good hedging tool against capital/stock markets, 58% seeing clear diversification benefits and 52% noting its ability to generate alpha.

Despite the encouraging sentiment, 34% are still concerned about liquidity risks, while 44% cite the potential of transaction costs edging higher.

“Alternative investments have become more common in investor portfolios but the challenge of accessibility relative to more traditional assets remains.”

Nearly two in five (38%) advisers felt they had too little understanding of the asset class to recommend it to their clients and 43% cite inaccessibility as an issue.

Steve Hunter, head of business development at Seneca IM, said: “Correlations between traditional asset classes have increased; institutional investors recognised the benefits of alternatives a long time ago, so it is good to see the retail market catching on to the benefits of diversification as risk levels sharpen.

“Alternative investments have become more common in investor portfolios but the challenge of accessibility relative to more traditional assets remains.”

He added: “Investment managers with a long track-record and intrinsic and disciplined approach to real assets and alternatives selection can provide investors access in an efficient way that can support their overall investment objectives.”

This article originally appeared on Investment Week on 28 January 2020.