Institutions typically invest between 30 and 50 per cent of their assets in alternatives, according to a study by McKinsey & Co. The average retail investor had just two per cent in alternatives, the same study said.
Asset managers are turning to affluent individual investors for new business as institutions hit self-imposed limits on allocations to alternatives, also known as “alts” in the industry. They are reaching them through wealth management, a business that combines asset management with financial planning and advice and is expected to swell to almost US$230 trillion in assets by 2030 from US$137 trillion in 2021, according to Bain, the consultancy.
Until recently, just a handful of institutional products have been available to retail investors such as Blackstone’s flagship Real Estate Investment Trust, an unlisted fund known as Breit, and its private credit fund, Bcred.“At least 15 to 20 new products with different strategies, from all different large managers, will hit the market in the next nine months. It’s a huge change,” said Steffen Pauls, founder of retail-focused private-equity investment platform Moonfare Gmbh.
“It’s a race to get a position in that market,” Sun Life president Steve Peacher said. Mergers in the space have been frenetic, he added: “If you’re not credibly and actively getting into in the next 18-24 months, it will be too late.”