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Alternative Investments for Retail Investors – Industry Ready: Kuldeep Shrimali

Alternative Investments for Retail Investors – Industry Ready: Kuldeep Shrimali


background

There are 17,200 private companies in the United States with annual revenue of more than $100 million, while there are less than 4,060 listed companies of the same size. Investors are increasingly exploring opportunities to invest in this area. While investing in private companies was previously limited to large institutional investors, qualified individual and home offices are now more frequently involved in the private market.

Additionally, the traditional 60/40 portfolio is 60% stock investment and 40% bond investment, which is a common starting point for a basic portfolio. Asset allocations are usually tailored to the investor’s time frame, risk tolerance and financial goals. In recent years, factors that contribute to the success of the 60/40 portfolio have faced challenges, including pandemic inflation uncertainty and current fiscal, trade and policy changes.

This requires rethinking portfolio building strategies. Strengthening portfolio resilience may require the exploration of alternative investments in addition to traditional stock and bond allocations. Alternative investments usually include private equity, private credit, real estate, infrastructure, natural resources and hedge funds.

Demand for alternative investments is increasing

Alternative investment is private investment, with fewer regulations than public investment. Additionally, the alternatives are less liquid because funds and underlying assets are not publicly traded. These investments take time to realize their value creation strategies, often requiring years of investment scope.

Key industry trends make alternative investments easier to access, including barriers to regulators removing retail investors’ access (e.g., European Long-term Investment Fund 2.0, LTAF-Long-Long Asset Fund), asset managers simplify alternative investments through familiar investment strategies (EG, model portfolio and hybrid management firms) and alternative investments by wealth management firms.

Several studies conducted by industry leaders show that demand for alternatives is expected to continue to increase.

  • The Preqin project may reach US$29.2 trillion in alternative assets under management (AUM) from 2029 to 2029. AUM for alternatives to AUM has increased significantly over the past decade, from about $7.2 trillion in 2014 to an estimated $18.2 trillion in 2024.
  • A survey by CAIS and Mercer found that 92% of financial advisers use alternative investments in client portfolios, with 91% planning to increase allocations over the next two years. Currently, 50% of consultants allocate more than 10% of client portfolios to alternatives, while 76% of consultants allocate at least 5%.
  • Cerulli Associates predicts that alternative investment managers will see individual clients account for 23% of their assets by 2028, up from about 13% in 2024. In addition, 43% of managers expect to allocate more than 5% of their replacement assets to alternative assets over the next five years.
  • A 2024 study by Bank of America found that young high-net-worth investors have allocated 17% of their portfolio to alternative investments, while older investors have allocated 5%. In addition, 93% of young investors plan to increase their investment in alternatives in the coming years.
  • HSBC – Wealthy Investor Snapshot 2025 report says 29% of wealthy investors plan to own private market funds (equity or credit) in the next 12 months in the next 12 months. About half of wealthy investors want to make alternative investments within a year, which is twice the current ownership level.

Provide alternatives to value propositions for certain companies

Leading companies strengthen their alternative investment products, and the selected examples are discussed below.

  • Charles SchwabPartnering with Icapital, it launched its alternative investment platform for retail customers with over $5 million in household assets. Schwab’s alternative platform for retail investors currently provides third-party funds with funds that allocate capital to private equity, hedge funds, private credit and private real estate. The company is expected to expand the scope of asset classes, including exchange funds and expand the options for funds in each investment class. Retail clients leveraging the new platform can choose to interact with Schwab’s alternative investment advisors, as well as their current Schwab financial advisor, wealth advisor or wealth advisor.
  • loyalty Proprietary research on alternative investments for consultants has been introduced. The study includes notes on alternative investment strategies for third-party registration and can be accessed through the Wealth Landscape Platform. Advisors can now use the new ALTS research portal to review options such as private credit, private assets and private equity funds, allowing different alternative investment strategies to be compared.
  • LPL Financial LPL Alts Connect has been introduced, a platform that enables consultants to research, purchase and manage alternative investments. The platform offers digital tools such as eligibility, electronic signatures and direct sales kit delivery. Alts Connect Investment Management is supported by a subscription that will replace the investment subscription and reporting process digitization.
  • this Bank of New York Mellon An alternative investment platform for wealth intermediaries and financial advisors was introduced, called Alts Bridge. The platform allows users to access comprehensive alternative asset managers including KKR, Apollo, Blue Owl Capital, Franklin Templeton, Coller Capital and Partners Group. The platform was initially available for BNY Pershing clients, expanding its services to US-based registered investment advisors (RIAs) and independent brokerage dealers.
  • Morning Star The Icapital partnership provides Morningstar Advisor workstation users with seamless access to alternative investments and analytics. The workstation will use Icapital’s analysis to provide risk scores to the portfolio, including private credit, private equity, private real estate, structured notes and hedge funds. This integration is designed to simplify review and access to these investments in the consultant’s workflow.
  • Black Stone An innovative customizable public-private model portfolio has been launched in a unified hosting account (UMA). These models are licensed by Geowealth UMA technology and are supported by Icapital’s advanced technical capabilities. This release represents the first instance of a customizable model portfolio, including private and public market assets, is available through the UMA platform with efficient management and hosting integration.
  • Edward Jones The company is expanding its products to include alternative investments for Edward Jones’ eligible clients, which recently launched private customer service tailored to high-net-worth U.S. investors. The company intends to gradually make these investments available to the broader market. Edward Jones Cenerations serves financial products, solutions and personalized experiences to customers with $10 million or more investable assets. Financial advisors serving Edward Jones on behalf of clients will also have access to CAI’s on-demand learning platform, CAIS IQ, as well as CAIS Live live educational events.
  • pioneer,,,,, Black Stoneand Wellington Management A new fund is being launched that will invest in public stocks, bonds and private markets. The program aims to expand private market products for retail customers. According to regulatory documents, the company plans to create a spacer fund that allows investors to limit quarterly withdrawals between 5% and 25% of the fund’s net assets value.
  • AuthorizationLeading workplace retirement plan providers are making private market investments easier to access. They announced a partnership with private investment fund managers to provide investments through collective investment trusts, usually only for qualified retirement plans. Partner companies include Apollo, Franklin Templeton, Goldman Sachs, Neuberg Berman, Pimco, Partner Group and Sagard.
  • Black Stone Private assets are expected to be included in their retirement plans as it further invests in alternative investments. The initiative represents a significant shift in the structure of retirement products, integrating traditional liquidity and high-cost private market investments into traditional retirement portfolios. The company will launch a target date fund in early 2026 that includes stocks, bonds and other assets such as private equity and credit.

Going forward: Integrating traditional and alternative investments

Wealth management companies must establish new or upgrade their existing capabilities so that retail investors can use alternative assets. A unified platform covering investment research, portfolio modeling, customizable strategies, portfolio management, execution and post-investment (performance reporting, tax management, customer support) will provide consultants with a fully-in-one solution for alternative investments. Platform features will vary according to each company’s value proposition; however, key features are outlined below for reference. Companies must distinguish themselves by tailoring experiences and investment strategies, automating workflows for consultants and providing excellent customer service.

Key Features

  • Advisors must have access to a curated market that offers alternative investment strategies for various asset classes (private equity, private debt, hedge funds) with lower investments.
  • Equip advisors with powerful tools for alternative fund screening and investment strategies to build personalized portfolios that align with client risk profiles and goals.
  • Includes a portfolio builder that enables advisors to upload clients’ existing traditional portfolios and illustrate the potential impact of integrating alternatives into overall holdings.
  • Advisors must be able to view the consolidated client portfolio covering both public and private investments. Companies must strengthen integration with downstream reporting and portfolio management systems to enable consultants to view their clients’ total wealth pictures.
  • Implement an account dashboard that presents both personal and consolidated customer holdings, as well as historic portfolio performance reports.
  • Use UMA (Uniform Hosted Account) to build sub-account portfolio accounting capabilities and place them in casing, allowing for public and private assets in a portfolio.
  • Develop centralized data centers and implement AI-driven analytics to increase transparency and simplify alternative portfolio management. Utilizing real-time data analytics can increase investor confidence by providing actionable and timely insights.
  • Leverage AI power tools to ingest documentation and financial statement information to provide automated consolidated reporting across the portfolio of alternatives.
  • Create a tailored educational program to address knowledge gaps to ensure investors have a clear understanding of the benefits and risks associated with alternatives. Companies can use blogs, podcasts, short videos and game learning to enhance the knowledge and confidence of retail investors.
  • Comprehensive compliance capabilities and automated regulatory reporting for alternative investments.

in conclusion

Companies must provide unique value propositions for alternative investments tailored to different customer bases. Companies must evaluate new business models to promote partnerships between traditional and alternative investment managers to acquire new investment opportunities and use existing distribution channels. Utilizing advanced technologies such as artificial intelligence can optimize consultant workflows and provide digital tools for consultants and clients to improve efficiency, effectiveness and customer experience.

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