Liquid Alternatives Preview

As EisnerAmper’s Financial Services’ practice readies its Q1 Asset Management Intelligence newsletter detailing anticipated industry trends for 2015, one of the predictions noted is that liquid alternatives will experience robust growth this year, both with regards to total AUM and through the number of new product launches. 

Swan Global Investments in Durango, Colorado is one manager that garnered new inflows and has plans to roll out more offerings. The firm has seen its flagship portfolio, the Swan Defined Risk Fund, more than double in AUM to nearly $1bn at the start of this year from $400m at the inception of last year thanks to commitments from large RIAs, banks and wirehouses.

As a result of its robust growth, Randy Swan, portfolio manager, said the firm for the first time is in the midst of building out a team of external wholesalers and targeting wealth management platforms at the investment banks. Further, he stated there are plans to launch new products implementing the flagship strategy on different underlying assets focused on 1) small-cap names, 2) gold, 3) real estate and foreign developed equities.

“Based on our seventeen-and-a-half year track record and our other experience, we believe we can apply the same investment strategy and processes to other underlying assets successfully,” he said.

As Swan offerings more liquid alternatives products, the firm will build out a consulting arm to work with advisors and brokers to educate them about the investment arena and help them construct portfolios in the space.
Rafay H. Farooqui, co-founder and president of CAIS, a New York-based financial product platform for RIAs and broker-dealers, confirmed that alternative strategies offered in ‘40 Act fund formats will continue to be an attractive growth area for all wealth portfolios over the next decade.

“Of course, they will need to perform and deliver on the promise of volatility reduction and low correlation to the broader markets and to traditional mutual funds,” he said. “A growing number of wealth advisors are using liquid alternatives as a key component of their asset allocation process.”