On the advisor side, the share of heavy users, defined as advisors with 10% or more of assets under management allocated to alternatives, is projected to double from 21% to 40% within two years. Average allocations are expected to climb from nearly 8% to around 11% over the same period.
“While demand for alternatives has remained resilient among advisors, liquidity constraints, high costs and complexity pose significant hurdles to expanded adoption. On top of these barriers, concerns around lack of knowledge and understanding of this asset class are prevalent,” said Kristin Hall, senior product manager in Escalent’s Cogent Syndicated division.
Affluent investors
Just over a third of affluent investors, 37%, said they understand only “a little” about alternative investments. “This suggests awareness is expanding, but knowledge remains limited among clients, highlighting a clear opportunity for advisors to provide specialized guidance and education,” Hall added.
That gap in understanding has a direct effect on who starts conversations about alternatives. Advisors, not clients, most often raise the subject. Among heavy users of alternative investments, however, clients initiate discussions 55% of the time, compared with 32% for light users, pointing to a link between investor familiarity and higher eventual allocations.
Millennials have been at the centre of the shift in sentiment. Initially drawn to alternatives in significant numbers, they are now recalibrating as market volatility brings risk into sharper focus.