A recent study on endowments shows that the allocations of alternative assets between 2002-2012 has grown dramatically. Troy Vanderburg, CEO of the Alternative Investment Store, says that this shift cannot be ignored, in moving from traditional asset classes towards alternative investments. The largest asset manager, Black Rock, was founded on alternative investments and they're still seeing growth today. This study reflects much the same, where 835 different endowments were studied in an ongoing watch of how institutions are using endowments specifically for allocating assets.
The report showed that in 2002, for example, equities made up about 50% of endowments, with that number dropping to 31% in 2012. Fixed income investments followed suit, dropping more than half from 23% to 11%. What stunned Vanderburg was that traditional asset classes shifted directly to alternatives and alternative investments in the average endowment portfolio shifted from 24% to to 54%, now comprising the majority of any endowment's portfolio.
Vanderburg believes people assume hedge funds when talking about alternative investments, however the asset classes go far beyond that, to include royalties, energy, real estate, auto finance and very liquid paper marketplaces. Due to the many disruptions in the credit markets over the past decade, there has been a great deal of credit opportunities in the alternative world. "It's important that when people look at alternative investments, they view that just as they would traditional portfolio management," Vanderburg says, adding that the "world is waking up to the fact that alternative assets classes have grown exponentially and as an asset class itself, it can be broadly diversified and really adds stability to a portfolio."
Hedge funds were originally introduced to hedge risks and as the markets become volatile, they will continue to produce strong results. Alternative investments are perceived to have more risk, Vanderburg notes, and at the Alternative Investment Store, they define an alternative investment simply as one not correlated to a stock, bond or cash markets and is primarily driven by the skill set of a manager, to include a hedge or real estate fund. They are looking to provide a positive, on-going return with the growth individuals need going forward.
Troy Vanderburg is CEO of the Alternative Investment Store and spoke with Alternative Investing News, providing online alternative investing video news content. Alternative Investing News is a featured network of Sequence Media Group. This video was brought to you by Vantage Self-Directed Retirement Plans.