$2T Growth Opportunity in Private Markets for Financial Advisors
Financial advisors are expected to nearly double their allocations to less-than-fully-liquid alternative investments over the next five years, creating a $2 trillion growth opportunity for asset managers as private markets continue expanding into the retail wealth channel, according to new research from Cerulli Associates.
The Boston-based research and consulting firm estimates that U.S. advisors currently allocate approximately $2.2 trillion to less-than-fully-liquid private capital investments. Continued adoption of interval funds, other private market vehicles and alternative asset allocation models is expected to drive an additional $2 trillion in advisor-managed assets into the category over the next five years.
Cerulli found that two-thirds of asset managers believe advisors’ need to demonstrate greater value to clients is the primary catalyst behind growing alternative investment adoption. More than half also cited increasing demand for income-generating investments as a key driver.
The report says strategic partnerships between traditional asset managers and private capital firms will become increasingly important as firms seek to broaden distribution through model portfolios, multi-asset solutions and defined contribution retirement plans.
“Traditional asset managers are seeking differentiated capabilities that can enhance their product offerings and support more competitive value propositions,” said Daniil Shapiro, director at Cerulli Associates. “At the same time, private capital managers often lack the distribution scale and brand recognition required to penetrate retail channels.”
Cerulli said successful expansion into the advisor market will depend on clearly defined partnerships among asset managers, technology platforms, turnkey asset management providers, trust companies and recordkeepers.
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