Nearly half of IFAs don’t rate their knowledge of alternative asset classes
Nearly half (48%) of advisers say their knowledge of what is on offer in alternative asset classes was either “poor” or “average”, according to a new independent survey commissioned by JR Bloodstock Investments. Of those IFAs polled, just 7% said they considered their knowledge of available alternative investments to be “excellent”.
In particular, four fifths of UK financial advisers admitted to overlooking returns from bloodstock investments, despite increased client demand for alternative and esoteric asset classes.
The telephone-based survey found a lack of awareness among intermediaries about the return profile of bloodstock investing, a sector that has generated healthy returns of up to 30% in recent years.
The survey, which comprised interviews with IFAs from across Great Britain and Northern Ireland between August and October 2019, revealed just less than one in five (19%) of advisers have actively advised on bloodstock investments. Some four fifths of those polled (81%) admitted they had not discussed these investments as a potential choice for clients seeking that a portion of their cash be invested in higher risk assets.
Nearly all of the respondents (96.3%) said their clients had allocated a portion of their portfolio to higher risk assets amid gloomy economic predictions for mainstream investments.
While many clients still expect intermediaries to hunt out good returns, more than two thirds (67%) of the advisers surveyed said they had been forced to “lower clients’ return expectations” in the past year due to the perceived return profile of traditional investments like equities.
However, some advisers may be failing to put clients’ risk allocation to its best possible use due to a lack of understanding about the available investment options in alternative assets.
In one of the most surprising findings, a “lack of familiarity” and “lack of information” were cited as the two main reasons for failing to recommend bloodstock investments to clients, at nearly 60% and 50% respectively – with many explaining they didn’t realise it was an option for more modest sums of money.
Jamie Railton, managing director of JR Bloodstock Investment, said the asset class offers a way for clients to diversify their portfolio.
He said: “Bloodstock investments are uncorrelated to traditional asset classes and offer the potential for clients to make double digit returns on assets earmarked for higher risk investments.”
In the 2017/2018 season, investors with JR Bloodstock Investments received net profits of 12% after the deduction of costs, sale charges and auction commissions. This was dwarfed by the 23% return in 2016/2017 and 30% in the year before that.
These returns are achieved by investing in a mix of thoroughbred foals rather than just an expensive portfolio of high-end horses, which allows investors to diversity the risk. With a minimum investment of £25,000, this asset class is far from just one for the super-rich.
While nearly half (44%) of advisers polled expressed surprise at these possible returns, nearly two-thirds (59%) did not feel they knew enough about the asset class to advise clients correctly.