The U.S. asset management industry is shifting its marketing muscle toward alternative investments and international equities at a rapid pace. In March, Putnam Investments President and CEO Robert Reynolds issued a challenge to financial advisors to seek value beyond U.S. mainstream equity and fixed income investments. Speaking at an annual Financial Advisor/Private Wealth Retirement Symposium, Reynolds said that "conventional wisdom shaped by decades of high-return investing – first in equities from 1982 to 2000, then in fixed-income markets over most of this young century – needs to be re-examined, revised or even scrapped."

Of course, there are a few caveats advisors could add – such as the fact that alternatives and international equities can lag performance of U.S. mainstream equity investments in a given year, or even over a multiyear period.

In the trend toward alternatives and international equities, individuals are far behind institutions – especially college/university endowments. According to a recent survey of 831 endowment funds conducted by NACUBO-Commonfund, only 27 percent of total assets were committed to U.S. equities and fixed income assets combined. Meanwhile, 52 percent of endowments' assets are in alternatives and 16 percent in international equities. The average endowment lost 0.3 percent for Fiscal Year 2012 (ending 6/30/12), compared to a positive 2.0 percent return for domestic equities and 6.8 percent for U.S. fixed income. You can use this annual study to monitor endowments' investment allocations, and also to emphasize to clients the risks of short-term underperformance in alternatives and international equities. The study is available at CommonFund.org.