Democratizing Alternative Investments

In the latest episode of the Alternative Allocations podcast series, Franklin Templeton’s Tony Davidow has an insightful conversation with the firm’s CEO, Jenny Johnson, regarding the burgeoning opportunities in alternative investments, especially in the current financial climate. They also discuss the importance of educating advisors and investors to help them use available tools appropriately.

In the latest issue of the Alternative Allocations podcast series, I had the pleasure of interviewing Jenny Johnson, President and Chief Executive Officer of Franklin Templeton, as we explored the democratization of alternative investments. We began our discussion by examining the firm’s acquisitions of Clarion Partners, Benefit Street Partners, Alcentra, Lexington Partners and K2 Advisors—and why these acquisitions are such an important addition to its offerings. Jenny noted that “Franklin Templeton was founded on the principle of the average investor participating in the stock market through mutual funds. We see a similar opportunity in alternatives, particularly in the wealth channel.”

Institutions and family offices have historically made significant allocations to alternative investments to source growth and income, dampen portfolio volatility through diversification, and hedge the impact of inflation. Product innovation, and access to institutional-quality managers, has helped to fuel the growth and adoption of alternatives investments by the wealth management channel.1

How Institutions Allocate to Alternatives

Jenny and I discussed the need for advisor education, and practical thought leadership, to help advisors and investors in using these versatile tools in the appropriate fashion. She shared the firm’s commitment to educating both investors and advisors regarding the role and responsible use of alternative investments by building a robust library of new content, including white papers, webinars, blogs and podcasts.

We also peered into the future of alternatives in retirement plans. Defined benefit pension plans have historically allocated to alternatives—but the access to alternatives in defined contribution plans has been more muted. Last year exposed the interconnectivity of most traditional investments, with both stocks and bonds being down double-digits.2 Given today’s market environment, and products more conducive to defined contribution plans, Jenny felt this market represents a significant opportunity for advisors and investors.