Almost every large traditional asset manager has a slide in their investor deck that likely did not exist a decade ago. It shows the firm’s asset split with a small but fast-growing category labelled “alternatives” with optimistic growth projections.
The rush to deliver alternative investment solutions makes sense. Investors want to diversify their existing holdings, and alternative assets potentially provide attractive diversification benefits.
Meanwhile, incremental fund flows continue to drift towards low-cost passive index funds, making the business of managed public market equity and fixed income portfolios increasingly difficult.
This, alongside the industry facing rising internal costs and stiff competition from the growth of pure-play alternative managers, has been a major headwind to traditional asset managers.
For BlackRock, the world’s largest asset manager, it looks to be the beneficiary of both trends: satisfying investor demand for both exchange-traded-funds (ETFs) with low fees and providing them with alternatives via its own private markets capabilities.
Good for business
It is also very lucrative to serve this demand. Even though BlackRock’s alternatives business only accounts for 3% of its total $15.3trn in assets under management, it accounts for 15% of the firm’s base fees, according to its latest Q2 2026 results.
So, it should come as no surprise that BlackRock has told investors it has a goal of reaching over 30% of its revenue to come from private markets and technology by 2030.
But to ramp up its alternatives business, the firm spent roughly $28bn in 2024 alone to purchase alternative managers Global Infrastructure Partners, HPS Investment Partners and alternative financial data provider Preqin.
One of the world’s largest traditional asset managers Franklin Templeton also went down this route, over the years acquiring several alternative asset managers: Benefit Street Partners, Clarion Partners, Lexington Partners and most recently, European direct lender Apera.
But for many other asset managers, partnership with an existing alternatives firm appears to have become the latest default approach. Last year saw a huge uptick in partnerships, with seemingly every major player in the industry.
Capital Group and KKR announced a collaboration for public-private credit interval funds. State Street Investment Management and Apollo launched an ETF holding private credit. Vanguard, Wellington and Blackstone partnered up for multi-asset funds with an alternative sleeve. AllianceBernstein, Brookfield and Carlyle entered into a similar partnership.
A partnership is cheaper and faster, and it lets a traditional manager offer their clients private markets exposure next quarter rather than a few years after integrating an acquired alternatives manager.
A compelling long-term growth opportunity
This whirlwind of partnerships between traditional asset managers and alternative managers comes as early movers like Franklin Templeton who built out their own capacity are seeing demand for alternatives accelerate their business.
During the firm’s latest quarterly earnings call, CEO Jenny Johnson went so far as to describe private markets as “one of the industry’s most compelling long-term growth opportunities”.
Its alternative business has recorded $33bn of private markets fundraising so far in 2026, exceeding its previous full year target with one quarter remaining. Johnson also expects $40bn in private markets fundraising by the end of the year, up from a previous target of $25bn to $30bn.
The firm said it is serving a broad shift in client demand, where investors are increasingly seeking asset managers that can deliver integrated solutions across public and private assets.
So, investors want private assets, asset managers want to sell private assets, but what about corporations borrowing needs?
They also want to tap into private credit markets, according to John Vibert, head of credit at PGIM. “Traditional public-market issuers are increasingly weighing the merits of public versus private execution and pledging fealty to neither,” he said.
He also made the case for managing public and private debt in an integrated fashion: “many credit portfolios remain organised around an increasingly outdated assumption: that public and private credit can—and should—be managed separately,” he said.
“That assumption is increasingly hard to defend in today’s market environment, given the fluidity of both capital and borrowers across public and private markets.”
“The very reason for private credit to exist is getting bigger”
However, as more traditional asset managers look to get into the alternative space, some caution may be needed, according to Richard Oldfield, group chief executive at Schroders.
He noted a growing trend of private credit lenders originating loans and selling them off to other investors.
“One of the things I worry about is that we’re seeing a little bit of creep back into the originate-distribute model,” he said, speaking at HSBC’s Global Investment Summit in Hong Kong earlier this year.
“Where are the incentives in the system when you’re originating a loan and you don’t have any responsibility for it? I think one of the things we should all be looking at is when you buy a product, where is the alignment between who’s originating the credit and you?”
“The last time you saw ‘originate to distribute’ get into a habit was in securitizations. So, as I look forward, one of the things I worry about is making sure we’ve got alignment between everyone through the value chain.”
He argued that alignment is critical going forward due to the increasing need for more infrastructure funding globally and the role private credit will need to fill.
“The need to create investment for infrastructure is getting bigger and bigger,” he said. “So, the very reason for private credit to exist is getting bigger.”
Indeed, private markets are increasingly filling a funding gap for long term investments in illiquid asset classes such as infrastructure, which are typically less well suited for public markets.
So as investors and savers continue to fill this funding gap, and as traditional asset managers look to provide investors with alternative asset exposure, firms in the industry may no longer neatly fit into one category or another in the future.
It is not clear what new label this combined category will be, but BlackRock’s chairman and CEO Larry Fink got so far in July as to say it is neither one or the other saying: “BlackRock is not a traditional asset manager, and we’re not a pure play private markets firm.”