By Deirdre Bolton March 5, 2012
Investor interest in alternative assets is on the rise. Hedge funds assets alone reached a record $2 trillion in 2011, and more mutual funds are adopting hedge-fund-like strategies to meet investor demand. Even traditionally conservative investors are using alternatives: They now account for about 40% of university portfolios, according to industry estimates.
The investment companies have taken notice. A colleague of mine told me that about 40% of the booths at the Schwab Impact 2011 Conference were focused on alterative investing. Schwab deals in as plain-vanilla, mass-market financial products as you can find. What was once niche is going mainstream.
Some business news outlets have responded by expanding their coverage of alternative assets. At Bloomberg TV, we launched a new show this year called “MoneyMoves” focused exclusively on alternatives. As the host, I’ve had to expand my knowledge fairly quickly, but reporters new to the beat should rest assured, it’s doable and worthwhile.
Alternative Assets Defined
The term “alternative assets” is a catchall that covers any investment outside of stocks, bonds or cash. It includes hedge funds, private equity, angel investing, venture capital, real estate, metals and what we at Bloomberg call “alt-alts,” – investments in offbeat assets like stamps, coins, wine, art, sports teams, Broadway shows and memorabilia like comic books.
A Broad Rise in Interest
Although the wealthiest investors are driving much of the interest in alternatives, average investors have begun to follow. Here’s why.
The credit crisis and its aftermath left many investors disillusioned with the conventional stock market. The S&P 500, for example, has exhibited unprecedented volatility and has yet to fully recover from the losses of 2008.
Meanwhile, investors who were burnt by complicated products during the credit crisis are now showing more of a preference for products they understand. Money that may have once gone to complex derivatives is now being funneled into hard assets like small businesses, real estate and gold.
For all the interest they’re attracting, getting a handle on alternatives asset performance can be tough, particularly for journalists. Few websites offer broad, fully comprehensive data, and those that do are often tied to asset managers looking to attract clients.
In some cases, an alternative fund might post its prospectus to show it has outperformed its benchmark index, the scale on which it rates itself. Although you’ll want to verify that benchmark data before citing it, the fund’s prospectus can give you a quick snapshot of how a particular alternative asset group has been performing lately. Consider it background.
A few companies host more detailed data on alternatives online. For example, Gust, a company that connects start-ups with investors, hosts data on angel investing.
Shaking Hands
Hedge fund managers are critical source for anyone covering alternative assets, but they are often difficult to get a hold of.
Some managers participate in panel events, but you will need an invitation to most of them. Bloomberg Link runs a few hedge fund conferences per year. As a member of the press, you can submit a request to the organizer and ask to be included. If there is room and your reporting doesn’t compete with Bloomberg’s, you will be issued an invitation. There is also a well-known hedge fund conference in May in Las Vegas called SALT run by Skybridge. The following month, there’s GAIM, which bills itself as “the world’s largest hedge fund alternative investment and hedge fund conference. The meeting pulls in a notable group of managers each year, perhaps because it’s in Monaco.
Even if you can’t go to the conferences themselves, the list of attendees should be useful to you as you build your Rolodex.
Friendlier Rules
Recent regulatory changes in alternative assets could make developing sources and quoting them on the record significantly easier.
As of the first quarter of 2012, most hedge funds must register with the Securities and Exchange Commission as registered investment advisors, which have the right the advertise. This new status allows hedge fund officers, who could not speak with the press in the past, to be quoted on the record. They still cannot encourage investors to put money into specific funds, but they can appear on TV or in print to discuss broader issues. Informed CIOs should no longer be skittish about talking on the record. (If they seem so, feel free to remind them that it is now legal.)
This regulatory change could make hedge fund officers as accessible as some often-quoted investment company heads like PIMCO’s Bill Gross, who appears on TV and in print a lot. He does not push PIMCO products, but he talks about the way the company views the investment landscape, which can be helpful for viewers and readers. (For Gross, the incentive is greater name recognition for his company.)
Most hedge funds will now be equally flexible in their communications. Informed CIOs will want to speak with you, particularly if your readership or viewership is fairly affluent. You may need to reassure them that you understand their limitations – that they can’t talk about their products – and remind them you’ll remain focused on their strategies and outlooks.
If you reach out, you’ll find CIOs will want to speak with you. That means an easier exchange of ideas between you and your sources and more fodder for story ideas down the road.
Deirdre Bolton is the host of “MoneyMoves,” a show about alternative investments on Bloomberg TV. Follow her on Twitter at @DeirdreBolton.
This entry was posted on Monday, March 5th, 2012 at 1:00 am. It is filed under On the Beat and tagged with alternative assets, Bloomberg, coins, gold, hedge funds, metals, private equity, real estate, venture capital. You can follow any responses to this entry through the RSS 2.0 feed.
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