The chase for double-digit returns is on as research shows people are increasingly open to non-mainstream investments.
The number of retail investors allocating funds to alternatives has doubled in the past five years, a survey by Macquarie Bank and research house Investment Trends shows.
People who consider the absolute return in making an alternative investment look for an average return of 16 per cent, while those who benchmarked against the Australian Stock Exchange or another index looked for an average out performance of 11 per cent.
Around 5000 investors with experience in alternatives were surveyed between September and December last year.
Alternative asset classes are experiencing high rates of growth, especially at the product level.
For people using a financial adviser, listed investments, capital guaranteed products, infrastructure and private equity were shown to be the most popular alternative vehicles.
In addition, people using an adviser had higher exposure to more investment catagories and financial markets than those who invest directly.
Among those with an adviser, 45 per cent had a self managed super fund and had more funds to invest.
The race to diversify portfolios will help and hinder product providers because investors have a low propensity to invest in the same thing twice, Investment Trends chief Mark Johnston said.
"Desire for diversification is a double-edged sword for providers of alternative investments," Johnston said.
People are chasing high growth but also want diversification within alternative investment classes, he said.
"The level of reinvestment is fairly low.it suggests the need for clusters or families of investments."
Strong demand for investment into Asia is being driven by the market volatility in the region and products are evolving rapidly to meet demand, Macquarie Bank equity markets group division director Cathy Kovacs said.
"[It] puts the onus on us to make sure the products...give the double-digit returns people have come to expect from the equity market," Kovacs said.
