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Affluent Turning To Alternatives

Alternative investing is gaining momentum among high-net-worth (HNW) investors (those with $5 million or more in total investable assets). Up from 7.7 per cent of client portfolios in 2020, HNW clientele now have an average of 9.1 per cent of their assets allocated to alternative investing options and advisors expect this to increase to 9.6 per cent by 2024, says Cerulli Associates. There are numerous reasons advisors are adding alternative investments to client allocations. Portfolio diversification (50 per cent) to help reduce volatility, along with new growth opportunities (50 per cent), are among the top reasons cited. Chayce Horton, research analyst at Cerulli, says, “By expanding opportunities into private asset and credit markets, affluent and HNW investors are better equipped to properly diversify their portfolios.” Moving forward, HNW practices report strong intentions to increase alternative investments in almost all strategies over the next two years. Private equity leads the way, with 50 per cent of advisors and executives planning to increase their allocations, followed by private real estate (45 per cent) and direct investments/co-investing (32 per cent). A vast majority (94 per cent or more) of surveyed HNW practices expect to maintain or grow their positions in all types of alternative investment opportunities, outside of hedge funds.

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