Cerulli: Partnerships Between Alts Providers and Asset Managers Are Increasing
Cerulli Associates, an international research and consulting firm, recently published The Cerulli Report—U.S. Alternative Investments 2024, which examines the overall state of alternative investments in the wealth channel.
In the report, the firm estimated that U.S. financial advisers own $1.4 trillion in semi-liquid assets. This figure is expected to grow to $2.5 trillion by the end of 2028. Additionally, while alternatives providers estimate that just 13% of their assets under management is sourced from the retail channel, they expect it to climb to 23% in the next three years, presenting alternatives providers with a potentially tremendous opportunity to gather retail assets.
To capitalize on this trillion-dollar opportunity, alternatives providers and asset managers are increasingly aligning through strategic partnerships. 53% of asset managers report they currently rely on such partnerships, and 50% are planning to increase this reliance. In these partnerships, traditional asset managers may tap into the capabilities of specialist alternatives managers to format and manage products while providing their established distribution pipelines to reach advisers and end investors.
“Strategic partnerships enable alternatives providers and asset managers to leverage each other’s strengths to reach new client segments that either firm may have been unable to serve on their own,” says Daniil Shapiro, Cerulli’s director. “Investors are looking for simple-access solutions to alternatives where one ticket can get them access to the broader alternatives universe or access to multiple exposures within one alternatives sub-asset class (e.g., varying types of private credit). Advisers using such products are likely to be helping their clients take initial steps of allocating to alternative investments,” says Shapiro.
Additionally, the report found that, while the use of alternatives by advisers has been growing, there are still some obstacles to widescale adoption. 60% of asset managers reported that low allocation to alternatives on the part of advisers’ home offices was a challenge to delivery. Another 52% reported the need for more alternatives-related education. Lack of brand name recognition when it came to alternatives distribution was cited as a challenge by 42% of asset managers.
On the adviser side, 55% of advisers stated that one of the significant challenges in allocating to alternatives was the limited liquidity of alternative products. Another 45% cited due diligence challenges, while 37% of advisers pointed to fees on alternatives being too expensive.
Headquartered in Boston, Cerulli Associates is an international research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development.
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