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Survey Shows Advisors' Enthusiasm For Alternatives

Tom Burroughes

16 January 2024

A survey of 260 financial advisors in the US has found that more than half of them put between 6 per cent and a quarter of clients’ portfolio allocations into alternative assets, and the clear majority plan to hike this further.

The study was conducted by CAIS, the US-headquartered fintech platform that says it is “democratizing” access to fields such as private equity, hedge funds and venture capital. CAIS produced the study in conjunction with consultancy Mercer, part of Marsh McLennan.

Most advisors said that alternative investments help clients meet goals and objectives and 59 per cent said that gaining access to alternative investment opportunities is helping them win new clients.

Since the 2008 financial crash and a decade and more of ultra-low/negative interest rates, alternative investments, such as private equity, credit, infrastructure and forms of real estate, have flourished. Investors are attracted to higher returns that typically accompany lower levels of liquidity. Since interest rates started rising about two years ago, challenges to fund-raising certain types of funds, such as venture capital funds, have increased. Even so, with the number of listed firms falling relative to unlisted businesses, there appears to be secular shift toward private market investing.

“The transition to a three-dimensional portfolio including alternative investments is accelerating rapidly. Our latest data suggests that alts are also helping independent advisors differentiate from competitors and build their practices,” Matt Brown, founder and CEO of CAIS, said. 

Hurdles remain in accessing alternative investments, the survey found: 55 per cent of respondents to the survey said that high levels of administration and paperwork are barriers. Advisors also cited lack of liquidity and concerns over due diligence and compliance as barriers to entry.

Most advisors allocated to alternatives were invested in real estate , private equity , and private debt . Nearly seven in 10 respondents suggested that they plan to increase allocations to private debt and private equity in the next 12 months.

“Overwhelmingly, our 2023 survey results suggest that the trends established last year are set to continue, regardless of recent macroeconomic shifts. Indeed, if advisors’ current allocations to alternatives are an indication, the transition from a traditional 60/40 portfolio to a more three-dimensional portfolio – one that includes public equities, fixed income, and alternatives – appears to be underway,” the CAIS report said.

In other details, half of surveyed advisors plan to maintain their current private real estate allocations, while nearly a third expect to increase them. Though 29 per cent of respondents do not plan to have clients allocated to infrastructure in the next 12 months, 32 per cent plan to increase their infrastructure allocation and 36 per cent intend to keep it as is.

About a quarter of surveyed advisors plan to increase their allocations to hedge funds or structured notes in the next year. Fewer advisors plan to increase allocations to natural resources or digital assets ; instead, more advisors do not plan to allocate to either.

The survey was conducted from September 12 to October 30, 2023, including at the CAIS Alternative Investment Summit, held in Los Angeles, California. 

Respondents included independent RIAs, broker-dealer affiliates, family offices and other advisor professionals. 

CAIS was founded in 2009 and supports more than 32,000 advisors, collectively holding more than $4 trillion in network assets. It has offices in New York, Los Angeles, Austin, and London.