More than eight out of 10 investment advisers report they have at least some clients invested in alternatives, but a growing number believe AI will become less relevant in the next five years. According to an Internet-based survey by Morningstar and Research magazine, 67% of respondents say they expect alternatives to become either “somewhat less important” (34%) or “much less important” (33%), up from a total of 52% a year ago. In correlation with those expectations, 44% of advisers are less optimistic about achieving double-digit growth in alternative assets under management annually over the next five years, down from 65% a year ago. In addition, only 41% report double-digit AUM growth annually over the past five years, compared with 57% who responded last year. The survey found that 83% of respondents have at least some assets in alternatives, with the bulk of them claiming between 1% and 10% of their total, while 6% says they have more than 20% in them. Do the math and that means 17% don’t have clients that invest in alternatives at all. In other findings:

--56% expect their AI assets to grow in the single digits, up from 35% last year;

--“Lack of liquidity” has knocked out “lack of understanding” as the primary reason why clients avoid alternative investments;

--18% of advisers say real estate was the main AI growth driver, down from more than 30% a year ago. Commodities dropped from No. 2 to No. 7 in this regard.

--60% of clients are accessing alternative investments through mutual funds, followed by exchange traded funds (46%), direct investment (42%), funds of hedge funds (26%), hedge funds (21%) and separate accounts (18%);

--12% of respondents say private equity will drive alternative investing, up from 5.5% in 2006;

--80% of advisers says they are not enthusiastic about 130/30 products or their variations, with 82% responding they have no clients who have even asked about them.