Key Takeaways
- • $10 trillion in wealth manager capital is projected to shift into alternative investments over the next decade, representing what industry panelists characterize as "one of the biggest re-allocations in finance," according to Jessica Nicosia of Wilshire at Informa's SuperReturn North America event on November 6, 2023.
- • Retail investor allocations to alternatives currently stand at less than 2%, compared to 5-10% for institutional investors, creating a substantial gap that asset managers view as a significant growth opportunity if allocations rise to institutional-typical levels.
- • Alternative asset managers are actively pursuing retail and high-net-worth investor channels across multiple strategies, including private credit, private equity, real estate, and infrastructure, with legal and service providers reporting daily client inquiries on market entry approaches.
- • Asset servicing and operational infrastructure remain critical enablers, with strategic partnerships among custodians, fintechs, and white-label solution providers accelerating market entry while managing compliance and operational complexity for GPs targeting the wealth channel.
Summary
Alternative asset managers are positioning themselves to capture a substantial wave of capital reallocation from wealth managers into private markets over the coming decade. At Informa Plc's SuperReturn North America conference in New York on November 6, 2023, industry panelists discussed the potential for retail and high-net-worth investors to meaningfully increase their alternative asset exposure. A recent industry analysis cited during the discussion estimated that $10 trillion managed by wealth managers could transition into alternative investments over the next ten years, though panelists acknowledged this figure remains subject to debate. Jessica Nicosia, senior vice president with Wilshire's alternative client solutions practice, moderated the panel and emphasized the magnitude of untapped opportunity: "There is a lot of wealth in the country and a lot of it today is not invested in alternatives."
The scale of the opportunity becomes apparent when examining current allocation gaps. Cyril Schopfer, managing director and head of CACEIS U.S., noted that typical retail investor portfolios currently allocate less than 2% to alternatives, a fraction of the 5-10% allocations common among large institutional investors. Even modest rebalancing toward institutional-typical allocations would unlock substantial capital flows. This reallocation potential is driving broad interest across alternative asset classes, with Nicole Runyan, partner at Kirkland & Ellis LLP, reporting that her firm's general partner clients—spanning private credit, private equity, real estate, and infrastructure strategies—are having daily conversations about accessing the retail and HNW investor base.
However, panelists cautioned that connecting with these capital sources involves significant challenges beyond simply opening distribution channels. The discussion emphasized that asset managers must address operational, regulatory, and service infrastructure requirements to effectively serve the wealth channel. The involvement of asset servicing specialists like CACEIS, legal counsel such as Kirkland & Ellis, and references to strategic partnerships with custodians and fintech providers suggest that successful market entry requires careful coordination across multiple service providers to manage compliance, reporting, and investor onboarding at scale.
The scale of the opportunity becomes apparent when examining current allocation gaps. Cyril Schopfer, managing director and head of CACEIS U.S., noted that typical retail investor portfolios currently allocate less than 2% to alternatives, a fraction of the 5-10% allocations common among large institutional investors. Even modest rebalancing toward institutional-typical allocations would unlock substantial capital flows. This reallocation potential is driving broad interest across alternative asset classes, with Nicole Runyan, partner at Kirkland & Ellis LLP, reporting that her firm's general partner clients—spanning private credit, private equity, real estate, and infrastructure strategies—are having daily conversations about accessing the retail and HNW investor base.
However, panelists cautioned that connecting with these capital sources involves significant challenges beyond simply opening distribution channels. The discussion emphasized that asset managers must address operational, regulatory, and service infrastructure requirements to effectively serve the wealth channel. The involvement of asset servicing specialists like CACEIS, legal counsel such as Kirkland & Ellis, and references to strategic partnerships with custodians and fintech providers suggest that successful market entry requires careful coordination across multiple service providers to manage compliance, reporting, and investor onboarding at scale.
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