Only 25% Of Wealthy Know Of Alts

Date: Monday, March 31, 2008
Author: Hedge Fund Daily

Three out of four mass affluent investors admit that they don’t know what alternative investors are, according to a new survey by Rydex Investments. Conducted in conjunction with e-Rewards, the study of 500 mutual fund investors with investable assets of more than $250,000 also found that less than 1% of those polled consider themselves “very knowledgeable” about alts, with more than 40% saying they don’t have access to information about them. One-third of respondents claim their knowledge of the asset class is based on magazine and newspaper articles. Among those who are familiar with alternative investments, 63% say they avoid them because they don’t know enough about them, while 25% responded that alts are too risky and 19% claim they don’t know how to go about investing in them. Another 15% of those surveyed believe alts are “too complicated,” while 5% believe they are only intended for folks wealthier than they are. In other findings:

• Younger investors tend to invest more in the class with those under the age of 31 (Generation Y) allocated 29% of their portfolio to alts, with the percentage declining as the investors grow older. Investors age 73 or older put only 10% in alternatives.
• 18% of male investors use alts, compared with 13% of females.
• Investors with household investable assets of more than $500,000 are more likely to own alts than those with less (51%), compared with 13% with assets between $250,000 and $500,000.
• Among those investing in alts, 83% do so for retirement income, while 73% hope alternatives’ returns will allow them to retire early.
• Real estate was the most popular alt, chosen by 28%, followed by private equity (16%) and commodities (9%).
• 77% of responded rated their satisfaction with Alts a four on a scale of five.