With barriers for smaller investors removed and amid growing demand for higher returns and diversification, alternative investments are rapidly gaining customers. As a result, big brokerages with products such as private-equity offerings, nontraditional mutual funds and market-linked investments are seeing increased business. "Clients who are seeking the diversification that comes from alternative investments can invest in them and maintain liquidity," said Andy Sieg, head of global wealth and retirement solutions at Merrill Lynch. "It broadens the set of clients for whom these are appropriate."

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