Alternative Investments Diversify Portfolios but Some Advisors Still Wary Pershing Study Finds

June 4, 2015

Alternative Investments Diversify Portfolios but Some Advisors Still Wary Pershing Study Finds

ORLANDO, Fla. - The majority of advisors intend to continue recommending alternative investments over the next year, yet believe the asset class has underperformed since the economic crisis, according to a new survey from Pershing LLC, a BNY Mellon company. The study, Help or Hype: Advisor Perceptions of Alternative Investments, which was released today at Pershing's INSITE 2015 conference, is based on a recent survey of 1,200 advisors conducted by Pershing in conjunction with Beacon Strategies LLC, along with interviews with advisors, broker-dealer firms, registered investment advisors (RIAs) and alternative investment managers.

"Alternative investments continue to interest all investors, from ultra-high-net-worth and high-net-worth investors to the mass affluent," said Justin Fay, vice president of investment solutions at Pershing. "Though some lingering skepticism exists about alternatives, largely due to recent lukewarm performance, we are seeing strong flows into this asset category. The findings of our study suggest that most advisors are optimistic about the ability of alternatives to deliver diversification benefits over time."

According to the survey, most advisors' primary goal in using alternative investments is to reduce volatility and diversify their client portfolios. Advisors who were surveyed indicated that 73 percent of their clients have at least one type of alternative investment in their portfolios.

The survey also found that:

  • 70 percent of advisors plan to maintain their current alternative investment allocation recommendation for clients over the next twelve months
  • However, almost half of advisors surveyed feel that alternative investments have underperformed since 2008
  • More than half of advisors (55 percent) surveyed believe that clients should allocate 6 to15 percent of their portfolios to alternative investments
  • 56 percent of respondents see value in allocating illiquid alternatives to investor portfolios
  • The principal drivers of product selection are the experience of the alternative investment manager and diversification options
  • The majority of advisors who do not currently recommend alternative investments to clients cited product expense, along with disagreement over the viability and basic premise of alternative investments

Broker-dealers and large RIAs who took part in the survey identified operational issues as an area of concern with regard to alternative investments–specifically with regard to processing, pricing/time to settlement, tax reporting and regulation.

"The findings of the study indicate that communication, product understanding and improvements to operational processes will be critical to mitigating these challenges," said Fay. "In response to the need for more education and training in the use of alternatives, Pershing launched the Alternative Investment Center last year. Through the center we provide advisors educational resources, research and solutions to position advisors to serve the needs of their clients seeking alternative strategies. Additionally, we recently introduced Online Order Entry to Entry to improve transparency and address the inefficiencies of manually placing orders."

Pershing LLC and Beacon Strategies conducted the alternatives survey over the course of two months in the winter and spring of 2015. Simultaneously, expansive interviews with financial advisors, RIAs and broker-dealer firms and alternative investment fund managers addressed both quantitative and qualitative aspects of the underlying research.

To download a copy of the full whitepaper, visit

About Beacon Strategies, LLC

Beacon Strategies, LLC is a premier research and consulting firm that specializes in technology developments for the financial services industry. Founded in 2006, the firm focuses on strategic and tactical decisions that banks, broker-dealers and financial advisors increasingly face in an increasingly fast-paced and hyper-connected business environment. Beacon Strategies delivers critical thought-leadership insight in print, in person and online through publications, website content, consulting assignments and industry-leading conferences and events.

About BNY Mellon's Pershing

BNY Mellon’s Pershing is a leading provider of clearing and custody services. We are uniquely positioned to help complex financial services firms transform their businesses, drive growth, maximize efficiency, and manage risk and regulation.

Wealth management and institutional firms outsource to us for trading and settlement services, investment solutions, bank and brokerage custody, middle and back office support, data insights, and business consulting.

Pershing brings together high-touch service, an open digital platform and the BNY Mellon enterprise to deliver a differentiated experience for every client.

Pershing LLC (member FINRA, NYSE, SIPC) is a BNY Mellon company. With offices around the world, Pershing has over $2 trillion in assets and millions of investor accounts. Pershing affiliates include Albridge Solutions, Inc. and Lockwood Advisors, Inc., an investment adviser registered in the United States under the Investment Advisers Act of 1940. Additional information is available on, or follow us on LinkedIn or Twitter @Pershing.

About BNY Mellon

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment and wealth management and investment services in 35 countries. As of June 30, 2021, BNY Mellon had $45.0 trillion in assets under custody and/or administration, and $2.3 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).Additional information is available on Follow us on Twitter @BNYMellon or visit our newsroom at for the latest company news.