Alternatives investments on the rise

Individual investors will increasingly use alternative investments, but so far their experience with non-traditional products has been limited, according to George Gatch, chief executive of JPMorgan Funds Management.
Mr. Gatch said the 64% allocation that the average defined contribution plan participant currently has in U.S. large cap equities probably will move closer to the 21% that ultrahigh-net-worth investors have in that asset class.
At the same time, hedge funds, private equity and real estate will become larger portions of investor portfolios, he said.
Mr. Gatch made his comments today in addressing financial services executives at the Tiburon Strategic Advisor’s CEO Summit in San Francisco.
But attendees at the conference voiced doubts about how well investors will do with alternatives.
Mr. Gatch acknowledged that market-neutral funds have done poorly so far, but others like inflation-protected bonds have done well.
Investors should also consider commodity-linked products and mutual funds that also short stocks, he said.
“Short selling will become very important in the management of mutual funds,” Mr. Gatch said.
He added that JPMorgan was deemphasizing separately managed accounts.
Most are not being used to minimize taxes or customize portfolios, he said.