92% of FAs Incorporate Alts in Client Portfolios — Evening Brief – 12.09.24
Financial advisors are increasing their appetite for alternative investments, with 92% currently incorporating the asset class in client portfolios, while 91% plan to increase allocations over the next two years, according to a survey by alternative investment platform CAIS and Mercer, the financial services and consulting arm of Marsh & McLennan.
The survey, The State of Alternative Investments in Wealth Management, also revealed that 50% of advisors currently allocate more than 10% of client portfolios to alternatives, while 76% allocate at least 5%. Private debt (89%), private equity (86%), and real estate (85%) continue to be the most popular asset classes among advisors.
“Private credit is one of the most discussed asset classes among advisors, which was echoed by the 2023 CAIS and Mercer survey finding that 68% of advisors planned to increase allocations to private debt during 2024,” Neil Blundell, CIO of CAIS Advisors, recently told Connect Money.
In addition, the survey results indicated a trend toward more streamlined solutions, with 77% of advisors favoring model portfolios to expedite allocations. The primary resources that advisors seek to simplify the process are portfolio construction tools (54%), and model portfolios (47%). Additionally, approximately 66% of advisors are more inclined to consider registered funds than private funds.
“As the wealth management industry continues to embrace alternatives, there is a pressing need for a streamlined, customizable and end-to-end investing experience to not only support advisors’ allocations to alternatives, but to help them scale their offerings,” added Blundell.
Advisors are increasingly seeking a single-platform solution to address traditional barriers to alternatives, such as administrative burdens and extensive documentation, as allocations to alternatives increase. The survey indicated that platform integrations are the most valuable technology feature for 66% of advisors, with analysis tools following closely behind at 60%.
Shifting preferences and emerging trends across alternative asset classes were also emphasized in the survey. Significant growth was observed in interest in structured notes, with 38% of advisors intending to increase allocations this year, an increase from 27% in 2023.
Additionally, nearly four in 10 advisors (39%) indicated that tax-advantaged strategies are among the top themes they would like to present to their clients this year, followed by infrastructure (28%) and artificial intelligence (28%).
The data is based on responses from 550 financial advisor respondents. The survey was conducted from September 10 to October 18.