For the first time, Cogent Research dedicated a portion of its annual Advisor Brandscape report to advisers’ usage and attitudes regarding alternatives.

The primary reasons that advisers are using alternatives are to further diversify portfolios (83%), manage risk (80%), or to achieve absolute returns (54%). Far fewer advisers report using alternatives in an effort to deliver returns above a benchmark (20%) or for tax management purposes (19%).

Cogent found that advisers allocate an average of 11% of their book to alternatives spread across a variety of different products. Independent advisers, the heaviest overall users of alternatives, show the strongest preference for venture capital, private equity, and hedge funds, while Bank advisers have a greater appetite for limited partnerships and RIAs tend to use structured products/notes.

“It was somewhat surprising to us to see such broad and consistent use of alternatives, not only across channels, but also based on assets under management,” said John Meunier, Cogent Principal and author of the 2011 Advisor Brandscape report. “Clearly, advisers of all stripes and tenure have embraced the notion that managing client portfolios in today’s environment requires the tools to provide greater asset-class diversification and better risk management strategies.”

Among the 22% of advisers not currently using alternatives, almost half (47%) admit that their own lack of lack of knowledge is holding them back. Fifty-two percent of current alternative investment product users indicate that a lack of client knowledge and sophistication is preventing them from embracing alternatives further.

Among eight separate types of investment vehicles, advisers say they are least likely to access alternative asset classes and strategies through mutual funds and exchange-traded funds (ETFs). However, over the next year, more advisers expect to increase their use of alternatives and ETFs than any other product or vehicles. In fact, 41% of advisers currently using alternatives indicate they will increase their use of ETFs and 28% will increase their use of mutual funds to access alternatives.

“These figures represent a huge opportunity for mutual fund and ETF providers to satisfy a growing demand among retail advisers for institutional-quality alternative investment strategies that are both scalable within their practices and palatable to skeptical investors,” said Meunier. “However, as they roll out new products or broaden distribution of existing offerings, providers must not overlook the importance of providing the support and education that will be required to promote acceptance.”

The 2011 Advisor Brandscape report was based on a nationally representative survey of 1,643 retail investment advisers.