Johnathan Rickman | Blue Vault

As the financial landscape continues to evolve, wealth advisors are staying ahead by broadening their expertise in alternative investments. These assets—ranging from private equity and private credit to real estate and commodities—offer more than just diversification beyond traditional stocks and bonds; they offer the potential for higher returns that advisors can leverage to help clients meet their wealth preservation goals.

With growing interest in alts, advisors who can effectively navigate these investments will be better equipped to provide tailored strategies for clients. Fortunately, the industry is pulling together to educate advisors about alts.

The Blue Vault 2025 Alternative Investments Mid-Year Outlook and Select Sector Reports—our largest and most comprehensive report to date—is a collaboration by some of the industry’s brightest minds. The purpose of the Outlook is to provide advisors with a review of where alternative investments stand at the mid-way point of the year and what to look for as we move ahead.

We asked Josh Hoffman, President at Bluerock Value Exchange and Head of Product Management and Strategy – Direct Investments, Bluerock, to explain the importance of the Outlook and how wealth advisors can use it to stay on the cusp of all things alts. Here’s what he had to say:

What does the Mid-Year Outlook say about the state of the alts industry?

“The alts sector has seen tremendous growth just in the past five years with total managed assets growing from $175.7 billion in 2020 to $507.4 billion in the first quarter of 2025, according to Blue Vault data¹. This tremendous growth is a result of the quality of the managers and the performance of the investment programs. We fully expect demand for alts to continue to grow at an accelerated rate as both advisors and investors seek solutions to further portfolio diversification and incorporate the many historical benefits provided by these investments.”

What would you tell advisors who are new to alts about the Outlook?

“Blue Vault’s network of alternative investment sponsors includes some of the largest and most well-respected managers in the industry. The Outlook brings together a wide range of attractive investment sectors and opportunities with insights and trends to help guide advisors in making smart investment allocations for their clients. I would encourage advisors to engage with these sponsor firms and dig into the opportunities that best align with their client’s interests and investment objectives.”

Has the alts industry finally arrived?

“From a macro view, alts are significantly under-allocated in most client portfolios. In a recent survey and report from CAIS-Mercer², roughly 50% of advisors allocate less than 10% of their allocations to alts and 23% only allocate 1-5%. And unfortunately, I believe actual allocations would be even lower if the survey were to include the full universe of wealth advisors. What is being identified by many as the opportunity, and in order to maximize client goals, alts should have a higher allocation in most client portfolios. In order to support the need for higher alternatives, we are seeing more investment managers enter the sector and design products that better accommodate retail investor needs, such as lower minimum investment thresholds and enhanced liquidity.”

Private credit is certainly having a moment. With differently structured products offering credit exposure, what do you tell advisors who don’t know which way to turn?

“Private credit provides great opportunities for enhanced income returns in this heightened rate environment, which is why we are seeing record capital inflows into the sector. The varying structures are due, in part, to how the fund managers feel they can best achieve their investment objectives and are a function of the underlying investments. For example, BDCs will generally make loans to, or invest in, middle market companies. Other structures like interval funds may invest in structured credit products such as collateralized loan obligations (CLOs). For advisors, understanding each fund’s underlying business plan, the regulatory and operating differences of varying fund structures, and each fund’s potential benefits and risks — and making sure those elements align with their client’s goals — are very important.”

Multiple contributors to the Outlook are optimistic on real estate while acknowledging ongoing market challenges. What are you hearing from advisors? Are they equally optimistic about real estate investing?

“Real estate is the third largest investable asset class behind equities and fixed income securities, and with real estate having performed very well historically, there is always high interest in the sector. Taking into consideration the 2023-24 real estate pricing correction and lingering high interest rates, many advisors are asking if the right entry point is now. The data for most sectors (excluding office) indicates high occupancy rates, supply/demand balance (with significant reductions in new supply), and a healthy economy, all of which typically bodes very well for the sector. In addition, commercial property values across the vast majority of sectors have increased from their trough over the past 12 months, indicating a good entry point.”

Josh Hoffman, in his role as a member of Blue Vault’s Educational Advisory Board, led the effort behind this year’s Outlook. Access the Blue Vault 2025 Alternative Investments Mid-Year Outlook and Select Sector Reports and explore our research for more alts information.

References

¹ Blue Vault as of March 31, 2025, and most recent filings for nontraded REITs, nontraded BDCs, and interval funds.

² CAIS-Mercer. The State of Alternative Investments in Wealth Management 2025.