Cerulli: Advisor Alts Allocations Could Double to $4 Trillion
U.S. advisor ownership of less-than-fully-liquid alternative investment products could grow by $2 trillion in the next five years, according to a new report from Cerulli. The firm estimates current allocations stand at $2.2 trillion, meaning AUM could nearly double in that timeframe.
The firm pointed to the growing number of interval funds and other semiliquid products as driving the current wave of adoption, even in the face of the recent spike in redemption requests that have affected some private credit non-traded BDCs and interval funds.
Overall, 82% of advisors surveyed for the report cited portfolio diversification as a primary goal in allocating alternatives. In addition, 57% of surveyed asset managers pointed to market demand for income-generating investments as a growth driver.
The report also confirmed that alternative asset managers have been the most aggressive in rolling out interval funds from the primary semiliquid wrappers. (That dovetails with industry data from sources like Morningstar, XA Investments and Stanger.) In all, 79% of surveyed asset managers already offer interval funds vs. 46% for non-traded BDCs, 41% for 3(c)7 funds, 41% for tender offer funds and 31% for non-traded REITs.
Notably, the research also found that despite the rise in alternative asset platforms and marketplaces, 94% of surveyed asset managers said they continue to rely on their own wholesalers for distribution. In addition, education—which asset managers, advisors and platforms have emphasized in recent years—remains a key area of focus. In all, 40% of advisors report discussing alternatives with clients as a most valued type of service.
The report also confirmed that partnerships between traditional and private capital managers (such as one between Wellington Management, Vanguard and Blackstone, which recently took its first two interval funds live) will be increasingly important in growth within the wealth channel.
“Traditional asset managers are seeking differentiated capabilities that can enhance their product offerings and support more competitive value propositions,” Daniil Shapiro, a director with Cerulli and the report’s primary author, said in a statement. “At the same time, private capital managers often lack the distribution scale and brand recognition required to penetrate retail channels, particularly beyond the ultrahigh-net-worth segment and into the broader affluent market. Working together, these firms can deliver solutions to retail investors that neither could provide as effectively on their own.”
