Alternative product providers estimate that only 13% of their managed assets come from the retail channel but expect this to increase to 23% in the next three years, according to The Cerulli Report-U.S. Alternative Investments 2024.
Cerulli estimates that U.S. financial advisors hold $1.4 trillion in alternative investment assets that are not fully liquid and forecasts this total will increase to $2.5 trillion by the end of 2028.
To seize this trillion-dollar opportunity, alternative product providers and asset managers are increasingly partnering through strategic alliances.
53% of asset managers say they currently rely on such partnerships, and half plan to increase this dependency.
“Strategic partnerships allow alternative product providers and asset managers to leverage each other’s strengths to reach new client segments that neither firm could have reached alone,” says Daniil Shapiro, director.
As partnerships proliferate, demand and development for multi-manager products have resurged, simplifying the way all investors, except the wealthiest, access alternative exposures, the consulting firm’s statement adds.
According to the study, multi-manager products can gain traction among a range of investors below the wealth levels of over $20 million (UHNW) and over $5 million (HNW), and allow access for advisors looking to venture into the alternative investment landscape with simplified solutions.
“Investors are looking for easy access solutions to alternatives where a single ticket allows them to access the broader universe of alternatives or multiple exposures within a sub-asset class of alternatives (e.g., different types of private credit). Advisors using such products are likely to help their clients take the first steps in allocating to alternative investments,” Shapiro states.
While alliances offer alternative product providers a legitimate pathway to retail assets, the risks of partnerships must be carefully considered, such as cultural clashes, overestimation of partners’ distribution capabilities, and the brand’s and exposures’ ability to resonate with advisors.
“Distribution synergies between channels should be examined, and future product roadmaps should be considered to ensure product-market fit,” Shapiro concludes.