Appetite For Alternative Assets Grows In Private Banking - Global Finance Magazine

Wealthy investors are increasingly reallocating capital away from traditional public equity and bond markets toward alternative assets, prompting private banks to expand their alternative investment capabilities. According to Mark Sutterlin, head of alternative investments at Bank of America Private Bank and Merrill Lynch, client demand for alternatives has surged significantly. The bank recommends that most private clients maintain an alternatives allocation of around 25%—a material shift from historical norms—citing concerns among high-net-worth investors about overvaluation in public equities, resurgent inflation risks, and anticipated market volatility.

A 2023 Bain & Co report reveals a stark allocation disparity across wealth segments. Ultra-high-net-worth investors and family offices managing more than $30 million in assets have already deployed 22% of their wealth into alternatives. However, investors with $5 million to $30 million allocate only 3% to alternatives on average, while those with $1 million to $5 million invest just 0.7%. This gap highlights both the sophistication differential between ultra-HNW and mid-market wealth managers and a major growth opportunity for private banks aiming to elevate alternatives exposure across their client base.

The structural opportunity is substantial: individual investors and family offices collectively hold more than half of the $289 trillion in global assets under management. This represents a largely untapped capital pool for alternative asset managers, particularly given the current underallocation relative to institutional investors, who already allocate 28–35% to alternative assets. As private banks develop expertise in private credit, direct real estate, infrastructure, and other non-traditional strategies, they position themselves to capture incremental fee pools while addressing client demand for diversification beyond traditional public markets.