Retail Investors Want Alts but Often Misunderstand Them, Deloitte Finds

Asset managers are working to sell private equity and private credit to everyday investors, and many of those investors want in. But a new Deloitte survey suggests the people most eager to buy these products often don’t understand how they work, and the way they invest may not fit them.

Deloitte surveyed 1,049 U.S. retail investors in June. As many as three in four said they are open to investing in alternatives such as private equity, venture capital, private credit and asset-backed finance. Of that group, 30% said they would consider an alternative investment if an advisor recommended it. Deloitte describes these investors as “persuadable.”

Younger investors showed the most interest. Interested investors ages 18 to 34 had a median target allocation of 30% of their liquid assets to alternatives. That compares with 15% for those over 65.

Their interest often runs ahead of their knowledge. Respondents named illiquidity as a top concern. But more of them said they would avoid a fund as its quarterly withdrawal cap got bigger, even though a larger cap lets investors take out more money. Deloitte said this suggests some investors don’t understand the basic features of these funds. Investors also rated their own knowledge of an asset class higher the more interested they were in it.

How people invest creates another problem. Eighty percent of retail investors hold non-retirement investments for less than five years. The median single investment is $1,000, and younger investors put in even less.

The report comes as policymakers, including the White House through a 2025 executive order on 401(k) plans, push to widen access to private markets.

Deloitte said advisors and asset managers should invest in investor education. It also suggested they rethink product structures and form partnerships to reach new investors.