Fidelity investments, which announced its alternatives partnership with Goldman Sachs Asset Management, Morningstar and CAIS in October, is doing a big educational push to get its retail clients up to speed on alternative investments.

The firm is working on a series of educational seminars and an online portal for advisors and GSAM's Nadia Papagiannis is also drafting educational brochures and web-based information for clients, according to speakers at Fidelity's Alternatives Roundtable in New York on April 3.

And it looks like many people could use the help, as barely anyone can define alternative investments in the first place. Before Garry Gallagher, Fido's senior v.p. for investment products and the panel moderator, could even get a word in edgewise, a journalist volleyed the question at him: what exactly is an alternative investment?

The question has come up a lot in conversations with industry executives lately. And it seems everyone has different answers, or at least the answer is a moving target. Michael Diamond, v.p. in product management for Fidelity Institutional, said the firm used to define alternatives as subscription based products that were illiquid. And working with them was largely reactionary, meaning that if clients came to Fidelity and were interested in a specific alternative fund, Fidelity would try to provide the access but wouldn't proactively bring these products to advisors. Now, it's working on a comprehensive alternative research and access platform.

Josh Charlson, Morningstar's head of alternative fund research, said his firm has a three-part check list for alternative investments: that it's a non-traditional asset class, (i.e. not vanilla stocks or bonds, but things like commodities or real estate or emerging markets), that it's something illiquid and/or that it's a non-traditional strategy (i.e something that uses hedging, shorting or derivatives, for example).

Though now that a lot of alternative funds are being offered in liquid form, having illiquid be part of the definition might be counterintuitive. Either that or the term "liquid alternative" will forever be relegated to oxymoron pergatory. Charlson said Morningstar now generally looks at alternatives more as something that will provide a lower correlation to the market and better risk-adjusted returns.

As far as delivering education to clients, Larry Restieri, GSAM's head of alternative sales in global third party distribution, has high hopes for explaining complex strategies to the average Joe. "It has to be something that my grandmother can understand," he said.

Speakers also noted that the firms that will succeed in getting traction in the retail market will likely be the large, long tenured ones with good track records and a recognizable brand. "We used to joke that a hedge fund could be three guys and a dog in Greenwich, Connecticut," Restieri quipped. "You can't do that with a '40 Act structure. You'll need a lot more infrastructure … or a lot more dogs."

Fidelity, which arguably has the retail market cornered in terms of clientele and product, also seems to be building something of a monopoly in the alts space. Its custodial bank decision, which has almost a trillion in assets and works with RIAs, broker dealers and family offices, now has Morningstar providing independent research on liquid alternative mutual funds, Goldman Sachs working on research, education and access to hedge fund and private equity funds of funds and CAIS delivering information and access to single-manager hedge funds, with support from Mercer on research and due diligence. 

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