Firms Jostle to Sell Alternative Assets to Wealthy Investors
The New Rush to Alternative Assets
The race is on to sell unlisted assets to wealthy individual investors. BNY, the giant custody bank, on Monday announced plans for a platform that makes it easy for financial advisers to buy and manage investments for their clients in a swath of products from well-known private equity, private debt, and infrastructure firms.
Recent Partnerships in the Market
That comes on the heels of three much-trumpeted partnerships between gigantic traditional asset managers and well-known alternative investment firms that take aim at the rich end of the retail market. Tie-ups between BlackRock and Partners Group and State Street with Apollo were announced last week, while Capital Group and KKR struck a groundbreaking deal in May.
- Financial firms are entering a fast-growing market that can generate hefty fees.
- They are adapting to an economic shift with more companies delaying or forgoing public listings.
Investor Trends in Alternative Markets
For an investor wanting to own the whole market, more of it is becoming private. While investors in private markets have primarily been pension funds and endowments, retail investors' involvement is on the rise.
- Just 13% of alternative firm assets came from retail clients in 2023.
- This share is expected to rise to 23% by 2026, according to Cerulli.
Risks and Challenges for Retail Investors
Analysts warn about significant risks ahead, especially around selling illiquid and hard-to-value assets to retail investors. Concerns persist regarding lack of transparency and high fees. Blackstone's successful Breit real estate fund had to limit withdrawals during high demand, indicating potential pitfalls.
New Platforms and Innovative Structures
BNY's upcoming platform will allow investment advisers to manage alternative assets efficiently. State Street is taking steps to launch an ETF that includes both public and private debt, which could be groundbreaking.
- BlackRock and Partners Group are creating diversified model portfolios for financial advisers.
- Education is crucial for understanding the structures and risks involved, especially with new product types.
Future Perspectives on Alternative Investments
Continued partnerships and new product developments indicate a growing appetite for alternatives among retail investors. As large financial firms seek to meet market demand, they will need to navigate the complexities and risks inherent in these investments.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.