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Cerulli Survey Results: New Themes in
Advisors Portfolio Strategies
By Bing Waldert
August 17, 2010

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For advisors who can successfully apply absolute return strategies and institutional portfolio construction techniques, there are a number of interesting potential client applications. For example, foundations, by rule, must pay out a specified percentage of their value every year. Likewise, endowments pay out a certain amount each year for an educational institution to meet set expenses. Given the predictable spending patterns of these institutions, both have increasingly adopted absolute return strategies in an effort to smooth returns. One can easily see then the application of these strategies for retirement income, where investors need a predictable stream of income to meet their retirement needs.

However, the challenge with change in strategy remains implementation. As portfolio construction techniques grow more complex, advisors need assistance and education in how to apply them to their client base. This challenge can be especially steep as they attempt to build bespoke portfolios for hundreds of clients, each with unique needs. Advisor Perspectives readers named access to research specialists and additional training as the factors that would help make portfolio construction easier. Herein lies an opportunity for product manufacturers, broker/dealers, and other service providers. Pre-crisis, some large wirehouses had research specialists who worked with advisors to design portfolios that included complex investment vehicles.  However, these specialists worked only with high-end advisors and their wealthiest clients. As interest in alternative asset classes grow, advisors can benefit from greater use of professionals with similar experience.

Content experts don’t necessarily need to be broker/dealer- or custodian-supplied either. As noted above, advisors are also seeking training and education around portfolio construction. Better than half of respondents named training and education as an important factor in choosing an alternatives manager. However, prospective managers should note that training ranks ahead of wholesaler support. If a manager is supplying training, it should not be a thinly veiled product pitch, but rather concrete examples of how a specific asset class or strategy can create better client outcomes.

Investors and advisors are clearly demanding new methods for reducing risk in portfolios. However, implementing those methods comes with added complexity and risk, if done incorrectly. Education will continue to play a major role in adoption of these strategies. Advisors are open to training on the topics, but that must be geared to client solutions and ultimately improving the client experience.


Bing Waldert is a Director at Cerulli Associates, responsible for intermediary distribution initiatives, focusing on distribution and strategic positioning within intermediary channels.  Bing has more than ten years of financial services industry experience.

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