Five in 10 advisors surveyed now reportedly allocate more than 10% of client portfolios to alternative investments, with nine in 10 or 90% planning to boost allocations over next two years, according to an update shared by CAIS.
Nine in 10 financial advisors surveyed (92%) currently incorporate alternative investments in client portfolios, with 91% planning to “increase allocations over the next two years,” according to the independent survey conducted by CAIS and Mercer.
Five in 10 advisors now allocate over “10% of client portfolios to alternatives, while more than three-quarters (76%) allocate at least 5%.”
The survey also revealed that advisors are looking for “more streamlined ways to access and allocate to alternatives, with 77% indicating a preference for model portfolios to streamline allocation.”
Advisors cited portfolio construction tools (54%) and model portfolios (47%) as their top resources to simplify the alternative investment process, and the majority (2/3) of advisors surveyed said “they are more likely to consider registered funds than private funds.”
This demand coincides with the launch of CAIS Advisors, a registered investment advisor that provides, or “expects to provide, 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.”
Neil Blundell, Chief Investment Officer of CAIS Advisors said:
“Responses from the advisor community illustrate the evolving advisor sentiment around alternatives from optional components to pillars of a portfolio. We’re seeing a seismic shift in demand as advisors 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, tools like model portfolios can assist advisors looking to refine and elevate their approach to alternative investing.“
As allocations to alternatives increase, advisors are increasingly looking for a single-platform solution to help “overcome traditional barriers to alternatives like administrative burdens and extensive paperwork.”
According to the survey, two-thirds (66%) of advisors “regard platform integrations as their most valuable technology feature, closely followed by analysis tools (60%), emphasizing technology’s role in centralizing alternative investment processes.”
Gregg Sommer, Partner and US Financial Intermediaries Leader at Mercer.
“The findings underscore the importance of equipping independent advisors with the same high-quality resources and due diligence capabilities that institutions have benefitted from. By providing due diligence and monitoring for funds on the CAIS platform, Mercer empowers advisors with research and risk management insights that extend far beyond the investment itself, helping them build differentiated portfolios with confidence and conviction.”
In addition to collaborating with CAIS, Mercer reportedly offers “strategies to firms serving individual investors.”
Via its infrastructure, fortified by providing advice to large institutional clients for nearly five decades, Mercer offers financial advisory firms a range of capabilities in “delegated solutions, manager research, alternative investments and portfolio construction.”
The survey highlighted shifting preferences and “emerging trends across alternative asset classes.”
Advisor 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 advisors are currently allocated to.”
Nearly four in 10 advisors (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%).”
Survey Methodology
The survey was conducted from Sept 10 – Oct 18, 2024, “including at the CAIS Alternative Investment Summit, the industry’s marquee event for independent advisors and asset managers hosted in Beverly Hills, CA. Respondents included independent RIAs, broker-dealer affiliates, family offices, and other advisor professionals.”
The data is based on responses from 550 financial advisor respondents.
