Alternative Investments

Why Alternative Investments

Alternative investments used to be limited to high-net-worth and institutional investors, but are becoming more mainstream. Retail investors are increasingly getting the opportunity to incorporate these types of assets into their portfolios to reduce overall risk and maximize value over the longer term. The demand for alternative investments is currently high and only getting higher.

Consider this:

At its pre-financial crisis peak: $2.2 trillion AUM.
2020: $10.8 trillion AUM
2021: $13.0 trillion AUM
2022: $14 trillion AUM
2026: $23 trillion AUM (fueled by private debt and equity)

(Source: Prequin, 2022)

The Education Gap

While demand is increasing there is also hesitancy (from advisors AND investors) when it comes to allocating to alternative investments. In a 2015 study by Morningstar and Barron’s, “Alternative Investment Survey of U.S. Institutional and Financial Advisors,” individuals (and their advisors) "are far more likely to hesitate to put money into an alternative investment due to a feeling of uncertainty around the benefits of alternatives, and a lack of clarity on how specific strategies “work” in the portfolio". They called this 'The Education Gap' (see image below).