Alternative Allocations: Due diligence—hook ‘em horns

We recently hosted two groups of advisors for back-to-back due diligence meetings in Austin, Texas. Advisors had the opportunity to hear from several of our specialist investment managers as we delved into allocating to alternatives, product evolution and portfolio construction. It was great to see the level of advisor engagement throughout both programs. Dave Donahoo, Head of US Wealth Management Alternatives at Franklin Templeton, said: “The opportunity for us to spend quality time with our partners enables us to provide updates on our strategies, bring in our specialist investment managers to share market outlooks and insights, answer questions and foster discussion.”

Over the last several years, the industry has evolved a great deal, and discussions with advisors have moved from “why allocate to alternatives?” to “how to allocate to alternatives.” To help advisors with their portfolio construction process, I presented my research on “Building Better Portfolios with Alternative Investments: A Goals-Based Framework,” which utilizes case studies to illustrate the impact of alternatives to achieve client goals.

I began each session with a live poll asking the attendees about their current allocation to alternative investments. After presenting data on the historical risk-adjusted results, sharing information about how institutions and family offices have allocated to alternatives, and how the various strategies complement different market environments, I asked about their intentions for the year ahead. In both sessions, more than 95% of the advisors said they plan on increasing their allocations to alternatives.

We believe that the increasing advisor adoption is a byproduct of better education, greater familiarity with the asset classes, and product evolution that has dramatically expanded the access to alternatives. We have been pleased to partner with many of the wealth management firms as they expand their menus of options and have committed resources to educate their advisors about how to use these versatile tools.  

I always enjoy spending quality time with advisors. It helps inform our thought leadership and confirms that we are making a difference in their knowledge and acumen. Matt Brancato, Head of Broker Dealer Alternative Sales at Franklin Templeton, ended the meetings by saying: “We look forward to these meetings and continue to evolve our sessions to expand on our opportunity set, expertise, and resources. Being a part of the larger Franklin Templeton allows us to offer educational opportunities that are invaluable to our partners.”