Fidelity Boosts Tools for Financial Advisors Embracing Alternative Investments!
In a landscape where financial advisors are increasingly seeking ways to diversify their portfolios, recent surveys reveal a striking gap in the adoption of alternative investments (or “alts”). While 86% of institutional investors have embraced these opportunities, only 26% of advisors have taken the plunge. This discrepancy primarily stems from the challenges advisors face in conducting thorough investment manager research and due diligence. To bridge this gap, Fidelity is rolling out exciting enhancements that promise to empower advisors with the tools they need to confidently explore the alts arena.
As alternative investment strategies rapidly evolve, the demand for robust resources to assess these opportunities has never been greater. Here’s what Fidelity’s surveys uncovered:
- Over half of advisors (54%) pinpoint investment manager research as the critical factor that could drive them to begin or expand their use of alts.
- More than half of advisors highlight due diligence on underlying strategies and managers as significant obstacles when dealing with intermittent liquidity (53%) and illiquid (55%) alts.
- Communicating the strategy to clients is also seen as a hurdle, with over half of advisors flagging this issue when considering alts.
“Alternative investments are becoming increasingly accessible, yet many advisors find themselves lacking the resources to effectively incorporate them into their portfolios,” said Darby Nielson, chief investment officer within Fidelity’s Institutional group. “Fidelity is devoted to equipping advisors with the insights and resources necessary to make informed decisions, empowering them to help their clients achieve financial success.”
Fidelity Unveils Exclusive Alts Research for Advisors
Fidelity is expanding its research capabilities to include comprehensive notes on third-party registered alternative investment strategies. This vital research is exclusively available through WealthscapeSM, Fidelity’s platform tailored for advisors. Now, navigating the new alts investment research portal is a breeze as advisors gain access to detailed insights on a variety of private credit, private real assets, and private equity funds, allowing them to critically evaluate and compare diverse alts strategies.
Utilizing a systematic and repeatable research process, Fidelity meticulously evaluates investment products by assessing key factors such as personnel, investment processes, strategy alignment, track records, investment terms, and overall governance.
Fidelity Expands Alts Thought Leadership Resources
Further cementing its role as a thought leader, Fidelity is enhancing its library of insights with the release of Evaluating Alternative Investment Strategies. This latest white paper dives deep into the manager due diligence process for alternative investments and illustrates how this process differs from traditional evaluations. Advisors can find this white paper and a wealth of other insightful content on clearingcustody.fidelity.com/app/item/RD_9906746.html, including Considerations When Implementing Alternative Investments in Multi-Asset Class Portfolios and Embracing Investment Evolution. For more insights from Darby Nielson on integrating alts into portfolios, check out institutional.fidelity.com/app/item/RD_9902269.html.
Discover Alternative Investments with Fidelity
Fidelity, through its asset management divisions, provides a diverse array of alternative investment strategies, including private equity, private credit, real assets, liquid alternatives, and digital assets. In the past year alone, Fidelity introduced its inaugural interval fund, the Fidelity Multi-Strategy Credit Fund, along with its first business development company (BDC). Not to mention, Fidelity launched three liquid alt mutual funds in 2022: the Fidelity Hedged Equity Fund (FEQHX), Fidelity Macro Opportunities Fund (FAQAX), and Fidelity Risk Parity Fund (FAPSX), all available commission-free through Fidelity’s online brokerage platforms.
As a leader in custodial services, Fidelity’s Institutional Wealth Management Services division manages over 5,000 alternative products for institutional and intermediary clients. With more than $70 billion in alternative investment assets under administration, Fidelity stands strong in the industry, equipped to conduct thorough research and share valuable thought leadership. The company’s comprehensive offerings also include integrations with CAIS and iCapital, platforms designed to facilitate access, education, and execution of alts, enabling advisors to make well-informed decisions regarding alts strategies.
About Fidelity Investments
Fidelity’s mission is straightforward: to enhance the financial well-being of our clients and deliver superior outcomes for individuals, families, employers, wealth management firms, and institutions. With a robust $12.6 trillion in assets under administration, including $4.9 trillion in discretionary assets as of December 31, 2023, we are committed to addressing the unique needs of a diverse and growing customer base. Fidelity has been privately held for 77 years and employs over 74,000 dedicated professionals across the United States, Ireland, and India. To learn more about Fidelity Investments, visit https://www.fidelity.com/about-fidelity/our-company.
* Fidelity Study of Allocations to Alternative Investments by Institutions and Financial Advisors, 6/23/2023.
** Fidelity Strategic Research & Insights, Alternative Investment Survey. Responses collected from 204 respondents between 4/8/21 and 4/30/21.
*** Fidelity Institutional Market & Competitive Intelligence, Alternative Investment Survey. Responses collected from 489 respondents between 10/09/2023 and 10/18/2023.
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Disclaimer: The information provided in this document is for informational and educational purposes only and does not constitute a recommendation to take any specific action, nor an offer or solicitation to buy or sell any securities or services presented. It is not investment advice. Fidelity does not provide legal or tax advice.
Before making any investment decisions, consult your professional advisors and consider all specific facts and circumstances relevant to your situation. Fidelity and its representatives may have conflicts of interest regarding the products or services mentioned, as they benefit financially from their management, distribution, and/or servicing, including Fidelity funds, certain third-party funds, and specific investment services.
Trading in commodity interests involves significant risks of loss. Past performance does not guarantee future results.
Alternative investment strategies may not be suitable for every investor and are not designed to serve as a complete investment program. Alternatives can be illiquid; determining an asset’s current market value may be challenging; and historical risk and return data may be limited. Transaction costs can be relatively high, and significant investment analysis may be required prior to investing.
Fidelity Multi-Strategy Credit Fund risks:
1. This fund is an unlisted closed-end interval fund and cannot be redeemed outside of its quarterly repurchase schedule, limited to between 5% and 25% of the fund’s outstanding shares at NAV. Unlike most closed-end funds, this fund’s shares will not be traded on any securities exchange. While a quarterly share repurchase program is planned, there is no assurance that all requested share sales will be fulfilled. Therefore, this fund should be viewed as offering limited liquidity.
Targeted towards long-term investors, this fund should not be treated as a trading vehicle. It’s a speculative, illiquid investment that carries substantial risks; prospective investors should only consider investing if they can afford to lose their entire investment.
Risk Factors
This fund is subject to risks stemming from fluctuations in interest rates. Given that the Federal Reserve continues to raise interest rates, the fund may face increased interest rate risk.
Distributions from the fund may derive from offering proceeds or borrowings, which could result in return of capital, diminishing the investment capital available for the fund. Any returns to shareholders via distributions will occur after fees and expenses are paid, along with any applicable sales loads.
The fund may invest in illiquid securities—those that cannot be sold within seven days at a value close to the price at which the fund has recorded them.
Investments may include bank loans that are typically not registered under federal securities laws, meaning investors in such loans have less protection against improper practices compared to those investing in registered securities.
The fund’s portfolio may contain securities from distressed companies, involving a high level of risk and requiring sophisticated analytical skills for successful investment; constant monitoring will be necessary.
Investments may also involve securities tied to real estate, which historically have seen significant price volatility.
Investments may include below-investment-grade instruments (commonly referred to as “junk bonds”), which carry speculative characteristics and are particularly vulnerable during economic downturns, potentially leading to losses.
Derivative investments come with risks, including the imperfect correlation between these instruments’ values and the underlying assets of the fund.
Collateralized loan obligations (CLOs) may entail risks similar to other debt obligations, and these risks could be more pronounced depending on the fund’s ranking in the capital structure. Investments in structured vehicles, including equity and junior debt securities issued by CLOs, introduce risks such as credit risk and market risk.
The fund may also invest in shares of other investment companies, meaning investors will bear not only their proportional share of the fund’s expenses but also indirectly bear similar expenses from the underlying investment company.
Borrowing money may amplify potential gains or losses on invested amounts, impose certain covenants the fund must adhere to, and heighten investment risks.
Investments in non-U.S. securities may be subject to volatility in undeveloped, inefficient markets and may exhibit greater price fluctuations, with changes in foreign currency exchange rates adversely impacting the US dollar value of foreign investments.
Refer to the fund’s prospectus for a comprehensive discussion of its risks.
2. There is no assurance that investors will be able to sell all or any of their requested fund shares in a periodic repurchase offer. No secondary market for the fund’s shares is expected to develop, and investors should consider shares to be illiquid investments.
Before investing, clients should consider the fund’s investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or summary prospectus, if available, containing this information. It’s important to read it carefully.
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