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Study: Education Paramount As Alternatives Become More Mainstream Among Investors

HOUSTON, Feb. 19, 2014 /PRNewswire/ -- Despite the growing proliferation of liquid alternative funds attracting considerable assets from investors, a recent study shows a vast majority of certain investors are not familiar with the term alternative investment.

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In November of 2013 Invesco teamed with Cogent Research, a division of Market Strategies International1, to survey investors with at least $250,000 in investable assets and who work with a financial advisor. Among this target group, 77% were not familiar with the term alternative investment, and among the 23% who were, only 4 out of 10 were using them. The remainder of the research focused on the 23%, or 429 investors, who were familiar with alternative investments.

"While at least somewhat surprising given the amount of discussion about this topic, these survey results present a tremendous opportunity for Invesco and our industry to better educate investors on the potential benefits of liquid alternative investments in a balanced portfolio," said Andrew Schlossberg, Head of U.S. Retail Distribution. "Based on the changing dynamics of today's global economy and markets, we see a long-term, growing need for alternative investments as a complementary component in portfolio construction among financial advisors and individual investors."

The survey indicated only 10% of participants believe they have a relatively high level of understanding about alternative investments, and their descriptions of an alternative investment were very broad and non-descript. For example, approximately 5% named money market funds as an alternative investment.

"While alternative investments are not new to the investing landscape, their adoption into the retail marketplace is still in the very early stages and I think the definition of these products remains a work in progress," said Gary Wendler, Head of Product Development & Investment Measurement/Risk. "With greater education will come a better understanding and recognition of how liquid alternatives can help investors meet their financial goals while providing a potentially better risk profile."

Many investors may be overlooking the possibility that a diversified portfolio containing traditional investments and non-correlated alternatives can be an effective way to mitigate volatility and improve performance. In fact, 80% of survey participants who held alternative investments in their portfolios considered them more risky than traditional investments.

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