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Research Reveals High-Net-Worth Investors Are Increasing Alts Allocation

According to a recently published research report, The Cerulli Report—U.S.  High-Net-Worth and Ultra-High-Net-Worth Markets 2022: Shifts in Alternative Allocations, alternative investing is increasing among high-net-worth investors, those with $5 million or more in total investable assets.

The report provides insights and analysis into the private wealth industry, focusing on high-net-worth and ultra-high-net-worth individuals and is published by Cerulli Associates, a research, consulting and analytics firm focused on the financial services industry.

Rising from 7.7% of client portfolios in 2020, high-net-worth clientele now have an average of 9.1% of their assets allocated to alternative investing options, and advisors expect this to increase to 9.6% by 2024, according to the report.

The report claims that there are a variety of reasons that advisors are adding alternative investments to client allocations such as portfolio diversification to help reduce volatility and new growth opportunities, both of which are among the top cited.

“Advisors, disappointed in public equity and fixed-income returns, are allocating more to private capital exposures,” says Chayce Horton, research analyst. “By expanding opportunities into private asset and credit markets, affluent and high-net-worth investors are better equipped to properly diversify their portfolios.”

Moving forward, high-net-worth practices report strong intentions to increase alternative investments in almost all strategies over the next two years. Private equity leads the way, with 50% of advisors and executives planning to increase their allocations, followed by private real estate at 45% and direct investments and co-investing at 32%.

A vast majority, 94% or more, of surveyed high-net-worth practices expect to maintain or grow their positions in all types of alternative investment opportunities, outside of hedge funds.

High-net-worth practices are also increasing offerings such as alternative manager search and selection as a primary service, growing from 50% in 2016 to 67% in 2022. Cerulli expects this trend among high-net-worth practices to persist as private markets continue to mature and prospects for additional tailwinds in the space proliferate.

“Practices competing in the high-net-worth advisory space should consider making these types of alternative investment consulting and implementation services a core part of their offering,” says Horton. “Access to alternative opportunities is a beneficial aspect of advisors’ service offerings that has proven to both attract and retain high-net-worth clients over time.”

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