The Inside Network's Alternative Symposium brought together advisers, asset consultants, researchers, and portfolio managers for two days of robust discussion about the evolving role of alternative investments in client portfolios. As always at these events the effusiveness of presenters was juxtaposed with the asset consultants natural instinct to look for the catch. 

The key takeaway for us, when all was said and done, was that we can fulfil a constructive role in 1) providing the caveat emptors and 2) finding ways to make sure clients are appropriately aware of what the complexity of these products bring, both in terms of opportunity and potential risks. Once the risks, caveats, and complexities of alternative products are properly addressed (or at least reduced as much as possible), it opens the door to potential opportunity. Advisers, asset allocators, and clients can then feel more confident and optimistic about including alternatives in portfolios.

Setting the Scene: Regime Change and Portfolio Construction

The conference opened with a  panel led by various consultants addressing various elephants in the room – are investors getting paid for the largely unseen risk in portfolios, do end investors understand the nature of those risks and in fact how deep do we all have to go down those rabbit holes before being confident ‘enough’?  

And then there was the question of whether we are entering a fundamental regime change in markets with higher real interest rates, bonds and equities potentially becoming more positively correlated after two decades of negative correlation. This backdrop makes the alternatives conversation more compelling but there are another couple of elephants lurking in the corner of the room, whose trumpeting comes to the fore now and then. The regulators are getting anxious about some of these products which is setting off the all important trustee/responsible entities while the financial press adds fuel to the fire. Even if it were possible for illiquids and other tracking error inducing alternatives to exist within the SMA’s that are increasingly a necessary part of successful, compliant and scalable advice businesses the Your Future, Your Super zeitgeist is very much pulling in the opposite direction. 

The Reality Check: Where Advisers Stand Today

One of the most revealing moments came from informal conversations and show-of-hands polling. While some advisers have implemented 20-30% allocations to alternatives across their entire client base, the majority described themselves as "dabbling" with select clients while continuing to learn. This measured approach reflects both prudence and the recognition that alternatives require deeper due diligence than traditional assets.

Interestingly, many advisers left with more questions than answers. We see that as a positive — it highlights an information gap that can be addressed. Given the complexity of this space, curiosity and thoughtful questioning are exactly what’s needed.

Redefining Sophistication: A Shift in Responsibility

A particularly significant theme emerged around the outdated concept of "sophisticated investor" classification. Advisers are increasingly developing their own frameworks for client suitability, moving beyond simple wealth thresholds to consider genuine understanding and appropriateness. This shift reflects a mature recognition that regulatory definitions alone aren't sufficient, advisers must do their own work and clearly articulate the rationale to clients.

This evolution away from "tick-the-box" sophistication toward genuine client-specific assessment represents a positive development in professional standards.

The Implementation Challenge: Beta vs. Niche

We also felt that conference content and discussions highlighted a crucial decision framework for advisers that has been coming to the fore recently: choosing between broad, beta-like alternative exposures versus more specialised, niche strategies. Large, diversified alternatives funds offer the comfort of standing alongside institutional investors with relatively predictable risk premiums. Conversely, specialised strategies may offer enhanced returns but demand significantly more due diligence and client communication.

For many clients, simple exposures to real assets, gold, or currency hedging through liquid vehicles may be entirely appropriate. The key is matching structure to client needs, not every investor with substantial wealth should consider themselves an endowment fund with corresponding liquidity tolerance. Equally though, certain clients will have very few liquidity constraints and earning a couple of percent by playing banker to those increasingly spurned by traditional banks will make intuitive and financial sense. 

Moving Forward: Tools and Communication

The conference underscored that success in alternatives requires enhanced communication tools. Advisers need materials that clearly explain not just opportunities but also the specific risks and structural considerations of each investment. As these investments often sit outside traditional platform structures and may require different regulatory treatment, the adviser-client conversation becomes even more critical.

Our take on all of this: 

First of all, we need to continue to support our clients through the research provided in the Alternatives tab of the Portal (if you don’t yet have access and are interested please register here). 

More than that though, we need to make sure that we equip advisers with a balanced view of what these products can do for individual clients and make sure we highlight what compromises need to be made in terms of costs, liquidity, risk etc as we remain skeptically convinced that there are no, or very few, free lunches or silver bullets in this universe. 

That said, there remains the opportunity for advisers to advise individual clients with different requirements and risk tolerances. In this way alternatives (especially illiquids) can live in harmony alongside the liquid SMA’s that are becoming the work horses of our industry.