Enthusiasm for alternative investments hasn't been dampened by the asset class's lacklustre performance in recent years, a study by Pershing has found.

The survey revealed that the majority of financial advisors will continue to recommend alternative investments to their clients in the next 12 month, even though they believe that, as an asset class, alternative investments have underperformed since the financial crisis. The survey was conducted by Pershing, a BNY Mellon-owned financial advisory firm, and is based on answers from 1,200 advisors, broker-dealer firms, registered investment advisors (RIAs) and alternative investment managers.

“Though some lingering skepticism exists about alternatives, largely due to recent lukewarm performance, we are seeing strong flows into this asset category. The findings of our study suggest that most advisors are optimistic about the ability of alternatives to deliver diversification benefits over time,” says Justin Fay, vice president of investment solutions at Pershing.

According to the findings, alternative investments are primarily used to diversify portfolios and to reduce volatility. Advisors who responded said that 73 per cent of their clients have at least one type of alternative investment in their portfolios.

The survey's results also found that:

• 70 per cent of advisors plan to maintain their current alternative investment allocation recommendation for clients over the next 12 months;
• almost half of advisors surveyed feel that alternative investments have underperformed since 2008;
• more than half of advisors (55 per cent) surveyed believe that clients should allocate 6 to 15 per cent of their portfolios to alternative investments; and
• the majority of advisors who do not currently recommend alternative investments to clients cited product expense, along with disagreement over the viability and basic premise of alternative investments.

The study was carried out over two months in early 2015. Download a copy of the full whitepaper here.