The job of many investment advisors has become broader and deeper. In the 1980's and 1990's, buy-and-
hold investments such as mutual funds and separately managed accounts were sufficient to meet clients’
performance expectations. However, in today’s more challenging environment, advisors need to offer a broader
menu of investment options beyond the traditional asset mix of stocks, bonds, and cash to reach the right level of
portfolio diversification.
In a move toward how institutional investors manage money and risk, an increasing number of advisory
firms are turning their attention to alternative investment strategies when investing in traditional asset classes.
According to recent studies, endowments with over $1 billion in assets have only a 21% allocation to standard
equities and 12% to fixed income. However, their allocation to alternative strategies is a whopping 46% for the larger
endowments, 39%for institutions overall. This advisor mindset shift is not surprising given the potential for
alternative investment products to enhance returns and mitigate risk. In fact, more than half (64%) of advisors
estimate they will increase their use of alternatives. Most advisors (56%) are getting exposure to alternatives
through mutual funds.
Advisors and clients expect different things when turning to alternative investment strategies. Some are
looking for different investment techniques (40%), some are seeking absolute returns (38%). Others are filling
portfolio allocations (29%), addressing portfolio correlations (28%) and seeking unique vehicle structures (25%).
Although institutions still dominate in this area, more alternative investments are becoming available to
mainstream investors, even while the majority (51%) of advisors say that the main reason clients hesitate to
invest in alternatives is lack of understanding. The need for education is underscored by a recent Rydex
Investments survey of individual mutual fund investors. Most investors (75%) don’t know what alternative
investments are, and less than one percent consider themselves very knowledgeable about alternatives. What’s
more, 40% of investors don’t feel that enough information on alternative investments is available to them.
The number one reason investors don’t invest in alternatives is that they don’t know enough about
them. But they want to know more. Half of investors surveyed (50%) indicate a desire to receive more
information about alternative investments from an investment advisor. When presented with a description of
alternative investments, 60% of investors said they would consider investing in alternatives if their advisor
recommended it. Pickens Asset Management, LLC is taking this opportunity to educate clients on these investment
options and their potential benefits. By sharing this information, we’re allowing clients to better understand our
investment approach and become more aligned with our advisory practice.
Education is just as important with prospective clients. Given the potential benefits of alternative investment
strategies (greater diversification, reduction of overall portfolio risk, and more consistent returns over time), it makes
sense that nearly half (45%) of investors surveyed would be more interested to work with a financial professional
who offers them than one who doesn’t.
A good starting point for talking about alternatives may be clarifying clients expectations for their
portfolios. The Rydex investor survey revealed that 6% of individual investors expect returns of less than 5% for
the next year, with 67% expecting portfolio returns of 5-10%, 21% expecting returns of 11%-15%, 5% expecting
returns of 16%-20%, and 0% expecting returns of 20% or more. Keeping in mind that, according to the survey, total
return maximization is a top goal for 59% of investors, raising the subject of alternatives may lead to a discussion on
which investment strategy(s) could help in reaching that goal for a client portfolio.
The trend of advisors and clients increasing their use of alternative investments is likely to continue.
Investors are looking for diversification and the proper risk/return characteristics in their portfolios. In addition, the
more our advisory firm can educate clients and prospective clients on the potential benefits of incorporating
alternatives into their portfolios, the more satisfied clients we're likely to have. Those are clients more likely to stay
with our firm for the long term, and more likely to spread the word about our alternative investment expertise.
Keep the following action items in mind as you move forward to increase your use of these investments.
• Go through the education process of learning about alternative investment strategies
• Ask a knowledgeable advisor to help navigate the complexities of investing in alternatives
• Get exposure to alternatives when it's appropriate
Embracing alternatives may be invaluable to the success and future growth of an investment portfolio.
If you are ready to get away from the market roller coaster and invest in an alternative strategy designed with the
potential to produce returns while mitigating risks, we invite you to learn more about our program by going to our
website at www.swingtraderforecaster.com
In closing, we would never recommend any investment program to any of our clients that we do not invest in
personally. We have our own money invested alongside that of every client Managed Account we recommend.
Thus, we'll look after your money just as if it were our own, because part of it is our own.
One last thought: By itself, any alternative strategy is not a complete investment program. Be sure and read the
disclosure for the program. We would also recommend you consult with your trusted financial advisor about making
any investment decisions.
Source Notes - Rydex Investments and e-Rewards conducted this survey of individual investors in March 2008. The survey was
conducted with 500 individual mutual fund investors. All participants had investable assets of more than $250,000, with 150 having
investable assets of more than $500,000. e-Rewards is not an affiliate of Rydex. The analysis is based on the number of completed
surveys and reflects only information from those surveys.
hold investments such as mutual funds and separately managed accounts were sufficient to meet clients’
performance expectations. However, in today’s more challenging environment, advisors need to offer a broader
menu of investment options beyond the traditional asset mix of stocks, bonds, and cash to reach the right level of
portfolio diversification.
In a move toward how institutional investors manage money and risk, an increasing number of advisory
firms are turning their attention to alternative investment strategies when investing in traditional asset classes.
According to recent studies, endowments with over $1 billion in assets have only a 21% allocation to standard
equities and 12% to fixed income. However, their allocation to alternative strategies is a whopping 46% for the larger
endowments, 39%for institutions overall. This advisor mindset shift is not surprising given the potential for
alternative investment products to enhance returns and mitigate risk. In fact, more than half (64%) of advisors
estimate they will increase their use of alternatives. Most advisors (56%) are getting exposure to alternatives
through mutual funds.
Advisors and clients expect different things when turning to alternative investment strategies. Some are
looking for different investment techniques (40%), some are seeking absolute returns (38%). Others are filling
portfolio allocations (29%), addressing portfolio correlations (28%) and seeking unique vehicle structures (25%).
Although institutions still dominate in this area, more alternative investments are becoming available to
mainstream investors, even while the majority (51%) of advisors say that the main reason clients hesitate to
invest in alternatives is lack of understanding. The need for education is underscored by a recent Rydex
Investments survey of individual mutual fund investors. Most investors (75%) don’t know what alternative
investments are, and less than one percent consider themselves very knowledgeable about alternatives. What’s
more, 40% of investors don’t feel that enough information on alternative investments is available to them.
The number one reason investors don’t invest in alternatives is that they don’t know enough about
them. But they want to know more. Half of investors surveyed (50%) indicate a desire to receive more
information about alternative investments from an investment advisor. When presented with a description of
alternative investments, 60% of investors said they would consider investing in alternatives if their advisor
recommended it. Pickens Asset Management, LLC is taking this opportunity to educate clients on these investment
options and their potential benefits. By sharing this information, we’re allowing clients to better understand our
investment approach and become more aligned with our advisory practice.
Education is just as important with prospective clients. Given the potential benefits of alternative investment
strategies (greater diversification, reduction of overall portfolio risk, and more consistent returns over time), it makes
sense that nearly half (45%) of investors surveyed would be more interested to work with a financial professional
who offers them than one who doesn’t.
A good starting point for talking about alternatives may be clarifying clients expectations for their
portfolios. The Rydex investor survey revealed that 6% of individual investors expect returns of less than 5% for
the next year, with 67% expecting portfolio returns of 5-10%, 21% expecting returns of 11%-15%, 5% expecting
returns of 16%-20%, and 0% expecting returns of 20% or more. Keeping in mind that, according to the survey, total
return maximization is a top goal for 59% of investors, raising the subject of alternatives may lead to a discussion on
which investment strategy(s) could help in reaching that goal for a client portfolio.
The trend of advisors and clients increasing their use of alternative investments is likely to continue.
Investors are looking for diversification and the proper risk/return characteristics in their portfolios. In addition, the
more our advisory firm can educate clients and prospective clients on the potential benefits of incorporating
alternatives into their portfolios, the more satisfied clients we're likely to have. Those are clients more likely to stay
with our firm for the long term, and more likely to spread the word about our alternative investment expertise.
Keep the following action items in mind as you move forward to increase your use of these investments.
• Go through the education process of learning about alternative investment strategies
• Ask a knowledgeable advisor to help navigate the complexities of investing in alternatives
• Get exposure to alternatives when it's appropriate
Embracing alternatives may be invaluable to the success and future growth of an investment portfolio.
If you are ready to get away from the market roller coaster and invest in an alternative strategy designed with the
potential to produce returns while mitigating risks, we invite you to learn more about our program by going to our
website at www.swingtraderforecaster.com
In closing, we would never recommend any investment program to any of our clients that we do not invest in
personally. We have our own money invested alongside that of every client Managed Account we recommend.
Thus, we'll look after your money just as if it were our own, because part of it is our own.
One last thought: By itself, any alternative strategy is not a complete investment program. Be sure and read the
disclosure for the program. We would also recommend you consult with your trusted financial advisor about making
any investment decisions.
Source Notes - Rydex Investments and e-Rewards conducted this survey of individual investors in March 2008. The survey was
conducted with 500 individual mutual fund investors. All participants had investable assets of more than $250,000, with 150 having
investable assets of more than $500,000. e-Rewards is not an affiliate of Rydex. The analysis is based on the number of completed
surveys and reflects only information from those surveys.
| Swing Trade Strategies-- Meeting Long-Term Objectives |
| This report represents only the opinions of Pickens Asset Management, LLC, an Registered Investment Advisory firm, contains general information and is for educational purposes only. The information contained herein should not be construed as personalized investment advice. Investing in the markets may involve gains and losses and may not be suitable for all investors. Information presented is subject to change without notice and should not be considered a solicitation to buy or sell any security. Past performance may not be indicative of future results. |
