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Alternative investments need to have track records of several years before fund managers and other financial advisors will consider investing in them on behalf of clients, says a poll published today. Past performance is seen as essential in the absence of regulation.

Amongst more than 40 senior figures from the wealth management industry including firms such as Merrill Lynch, Rothschild Private Management and Credit Suisse, nearly three quarters (73.3 per cent) believe that alternative investments such as wine, art, forestry and bloodstock need to have a track record stretching back several years before these advisors will consider recommending that clients invest in them.
The poll took place during an event hosted by Lawrence Graham LLP and promoted by Family Bhive, an exclusive member-based website comprising wealth owners and the private client industry which serves them.

“Almost all of those present reported that there is a major demand for alternative investments at the moment and great interest in investing in these assets which offer significant potential compared to traditional equities and bonds,” said Caroline Garnham, a partner at Lawrence Graham and the founder of Family Bhive. “But the lack of regulation around real assets (as distinct from financial assets) and concern about due diligence is obviously a key concern, our poll shows, hence, the interest in a track record as a way of instilling confidence.”

Despite concerns about scaleability, the smaller size of funds was part of the appeal for 41.3 per cent of those present, with just 13 per cent saying that it was “off putting,” and 45.7 per cent describing size as “irrelevant.”

Wine was considered to be the best performing class of asset funds. According to those present 40.9 backed this asset, compared to 29.6 per cent for small cap businesses and 11.4 per cent for art.

ENDS

NOTES TO EDITORS:

The full findings of the poll are below.
For more information please contact Richard Hutton: richard@familybhive.com

Alternative Investment Debate Questions - Monday 28th February 2011

(Percentages of those voting for each option shown in brackets)

1. Real Asset Investment Funds are mostly small, between $50million and $100million. Do you see the size of the fund as being: -

- Part of the attraction of the fund (41.3%)
- Off putting (13%)
- Irrelevant provided that the fund manager made a profit for the last two years (45.7%)

2. Last year which class of Asset Funds was the best performing?

- Wine (40.9%)
- Art (11.4%)
- Bloodstock (2.3%)
- Diamonds (9.1%)
- Small Cap businesses (29.6%)
- Forestry (6.8%)

3. How important is it for you to be able to have physical access to the underlying investments?

- Important (53.5%)
- Not important (23.3%)
- Irrelevant provided the fund manager made a profit for the last two years (23.3%)

4. How important is it for you that the fund has a track record of several years?

- Important (73.3%)
- Not important (22.2%)
- Irrelevant provided that the fund manager made a profit for the last two years (4.4%)

5. Would your prime motivation to invest in an Asset Investment Fund be because:

- You love the assets in the fund (2.2%)
- You love the asset class (4.4%)
- It will make you money (62.2%)
- You want to diversify (31.1%)

6. Real Asset (as distinct from financial assets) Investment Funds are not regulated. Do you feel that: -

- This is of concern to you (41.9%)
- Regulation does not determine whether an investment is good or not (48.8%)
- This is of no concern to you (9.3%)

7. Very often the exit which is when the fund managers decides the best return on the fund has been made is determined by extraneous factors such as fads, fashion and hype. Does this make the fund: -

- More attractive to you (18.9%)
- Less attractive to you, provided it makes you a profit (81.6%)


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