It’s Getting Easier to Invest in Alternatives
November 1, 2021 | Doug Krupa & Dan Parant | WealthManagement.com
Alternative investments, those often illiquid private funds offered previously only to institutions and ultra-high-net-worth family offices, have evolved. Whether in the pursuit of alpha, enhanced beta or the hunt for higher income streams, well-chosen alternative investments can now help individual investors build diversified portfolios that achieve their wealth objectives.
In February 2021, KKR surveyed UHNW family CIOs and found that families with $1 billion or more in assets under management allocated 51%–54% to alternatives. Families under $1 billion had 44%. Mass affluent investors are estimated to allocate less than 5% to alternatives.
Advisors for the wealthiest families invest substantially in alternatives to achieve their clients’ goals for wealth accumulation and preservation. Allocations to top funds can outperform comparable public benchmarks. They can also offer valuable diversification and attractive exposure to thematic investments.
Many of the best-known asset managers have made new alternative strategies available to individual investors across asset classes such as private equity, real estate and private credit. With innovations in alternatives’ design and delivery improving the investor experience, financial advisors may want to take a fresh look at what has long been a go-to asset class for large institutions and family offices.
