Survey: Half of Advisers Allocate Over 10% Of Client Portfolios to Alts
According to the third annual independent survey conducted by CAIS and Mercer, nine in 10 financial advisers currently incorporate alternative investments in client portfolios, with 91% planning to increase allocations over the next two years. Also, five in 10 advisers now allocate over 10% of client portfolios to alternatives, while more than three-quarters (76%) allocate at least 5%.
The survey revealed that advisers are looking for more streamlined ways to access and allocate to alternatives, with 77% indicating a preference for model portfolios to streamline allocation. Advisers cited portfolio construction tools (54%) and model portfolios (47%) as their top resources to simplify the alternative investment process, and two-thirds of advisers surveyed said they are more likely to consider registered funds than private funds.
The survey of 550 financial adviser respondents was conducted between Sept. 10 and Oct. 18, 2024. Respondents included independent registered investment advisers, broker-dealer affiliates, family offices, and other adviser professionals.
These preferences coincided with the launch of CAIS Advisors in mid-October. Previously reported by The DI Wire, CAIS Advisors is a registered investment adviser that provides discretionary investment advisory services to private funds and to registered investment companies. It will also create and provide advice on customized alternative investment model portfolios.
“Responses from the adviser community illustrate the evolving adviser sentiment around alternatives from optional components to pillars of a portfolio,” said Neil Blundell, chief investment officer of CAIS Advisors. “We’re seeing a seismic shift in demand as advisers increasingly recognize the diversification and growth potential alternative investments provide. With trillions of dollars potentially moving from traditional assets into alternatives over the next decade [according to Cerulli Associates], tools like model portfolios can assist advisers looking to refine and elevate their approach to alternative investing.”
As allocations to alternatives increase, survey results confirm that advisers are increasingly looking for a single-platform solution to help overcome traditional barriers to alternatives like administrative burdens and extensive paperwork. Just over two-thirds of advisers regard platform integrations as their most valuable technology feature, closely followed by analysis tools (60%), emphasizing technology’s role in centralizing alternative investment processes.
“The findings underscore the importance of equipping independent advisers with the same high-quality resources and due diligence capabilities that institutions have benefitted from,” said Gregg Sommer, partner and U.S. financial intermediaries leader at Mercer. “By providing due diligence and monitoring for funds on the CAIS platform, Mercer empowers advisers with research and risk management insights that extend far beyond the investment itself, helping them build differentiated portfolios with confidence and conviction.”
CAIS, founded in 2009, is an alternative investment platform for independent financial advisers. It offers a broad selection of alternative investment strategies, including hedge funds, private equity, private debt, real estate, digital assets, and structured notes.
Last week, CAIS unveiled a series of new trade capabilities to be made available to over 2,000 wealth management firms. The updates are designed to simplify the alternative investment lifecycle for financial advisers.
In addition to collaborating with CAIS, Mercer – a business of Marsh McLennan, which cites an annual revenue of $23 billion – offers innovative strategies to firms serving individual investors. Mercer offers financial advisory firms a range of capabilities in delegated solutions, manager research, alternative investments and portfolio construction.
The survey also highlighted shifting preferences and emerging trends across alternative asset classes. Adviser interest in structured notes showed significant growth, with 38% planning to increase allocations this year, a notable rise from 27% in 2023. Private debt (89%), private equity (86%), and real estate (85%) remain the top asset classes in which advisers are currently allocated. Additionally, nearly four in 10 advisers (39%) indicated that tax-advantaged strategies are among the top themes they would like to present to their clients this year, followed by infrastructure (28%) and artificial intelligence (28%).
To view the full report and findings, click here.
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