Alternative investing could erupt

Dramatic changes in the alternative-investment industry in the past five years could look like mere baby steps in contrast to what lies ahead.

That was an underlying theme at the Alternative Investing Summit, held recently in Rancho Mirage, Calif.

As both individual and institutional investors increase their allocations of hedge funds, venture capital and various private-equity deals, asset management companies and intermediaries are scrambling to identify and package products to meet the growing demand.

Also, an army of support service organizations more commonly associated with traditional asset management – including administration, back office, record keeping and accounting – are discovering greater business opportunities.

“This is one of the best conferences I’ve attended in years,” said Robert Levitt, a Boca Raton, Fla., financial adviser who went to the Opal Financial Group conference to expand his understanding of the alternative-investment universe.

interest is diverse

While much of the conference focused on the expected rush of institutional investors into the market, advisers such as Mr. Levitt, who manages about $200 million, are also turning to alternative investments for diversification and performance.

“Our comfort level and knowledge level when it comes to alternative investments is increasing,” he said.

“We went into alternative investments in 1999, and it turned out to be one of the smartest things we could have done. It allows us to buy more risk in the traditional markets.”

Experts have long predicted that institutional investors will have a big effect on alternative investing.

The institutions, in turn, are expected to lead the alternative-investment industry to be more receptive to such things as increased transparency, liquidity and standardized risk management models.

Institutional investors and asset management organizations are reaching turning points that show in which direction the industry is headed.

For instance, over the next few months both Deutsche Banc Alex. Brown and Banc of America Capital Management will expand their fledgling hedge fund products to include institutional investors.

Mark Anson, senior investment officer for California Public Employees Retirement System, announced that he was looking to diversify into alternative investments despite media reports to the contrary.