Key Takeaways
- • High-net-worth investors have increased alternative investment allocations to 9.1% of portfolios in 2022, up from 7.7% in 2020, with advisors projecting further growth to 9.6% by 2024, according to The Cerulli Report on U.S. High-Net-Worth and Ultra-High-Net-Worth Markets.
- • Portfolio diversification (50% of advisors) and new growth opportunities (50%) drive allocation increases, as advisors seek to reduce volatility and capitalize on private capital and credit market exposure following disappointment in public equity and fixed-income returns.
- • Private equity leads expansion plans, with 50% of HNW practices intending to increase allocations, followed by private real estate (45%) and direct investments/co-investing (32%) over the next two years.
- • Alternative manager search and selection services have grown substantially among HNW practices, increasing from 50% in 2016 to 67% in 2022, reflecting the maturation of private markets and advisor capacity to support institutional-grade investment access.
- • A strong majority (94% or more) of surveyed HNW practices expect to maintain or grow positions across all alternative investment types, with hedge funds as the sole category showing lower conviction.
Summary
Alternative investments are gaining significant traction within high-net-worth portfolios as advisors reallocate capital away from traditional public markets. According to The Cerulli Report on U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2022, HNW investors—defined as those with $5 million or more in total investable assets—now allocate an average of 9.1% to alternative strategies, a meaningful increase from 7.7% in 2020. Advisors project this trend to accelerate, forecasting allocations to reach 9.6% by 2024. This reallocation reflects structural shifts in advisor sentiment toward traditional asset classes and growing client demand for diversified return sources.
Advisors cite two equally weighted motivations for expanding alternative allocations: portfolio diversification to reduce volatility (50% of respondents) and access to new growth opportunities (50%). According to Chayce Horton, research analyst at Cerulli, disappointment in public equity and fixed-income returns is prompting advisors to redirect capital toward private capital and credit exposures. By expanding into private asset and credit markets, HNW investors gain better portfolio diversification and enhanced risk management, particularly in inflationary environments where traditional fixed-income instruments face headwinds.
Private equity emerges as the strongest growth vector, with 50% of HNW practices and executives planning to increase allocations over the next two years. Private real estate follows closely at 45%, while direct investments and co-investing opportunities attract 32% of advisors planning increased exposure. Notably, 94% or more of surveyed HNW practices expect to maintain or grow their positions across alternative investment categories, with hedge funds as the only exception to this broad conviction pattern.
Service offerings among HNW practices are expanding in parallel with allocation growth. Alternative manager search and selection services have grown from 50% of HNW practices in 2016 to 67% in 2022, indicating an industry-wide shift toward providing institutional-grade investment access and due diligence capabilities. Cerulli expects this service expansion trend to persist as private markets continue maturing and new investment opportunities proliferate in the space. This evolution positions advisors to compete by delivering comprehensive alternatives platforms rather than relying solely on traditional wealth management services.
Advisors cite two equally weighted motivations for expanding alternative allocations: portfolio diversification to reduce volatility (50% of respondents) and access to new growth opportunities (50%). According to Chayce Horton, research analyst at Cerulli, disappointment in public equity and fixed-income returns is prompting advisors to redirect capital toward private capital and credit exposures. By expanding into private asset and credit markets, HNW investors gain better portfolio diversification and enhanced risk management, particularly in inflationary environments where traditional fixed-income instruments face headwinds.
Private equity emerges as the strongest growth vector, with 50% of HNW practices and executives planning to increase allocations over the next two years. Private real estate follows closely at 45%, while direct investments and co-investing opportunities attract 32% of advisors planning increased exposure. Notably, 94% or more of surveyed HNW practices expect to maintain or grow their positions across alternative investment categories, with hedge funds as the only exception to this broad conviction pattern.
Service offerings among HNW practices are expanding in parallel with allocation growth. Alternative manager search and selection services have grown from 50% of HNW practices in 2016 to 67% in 2022, indicating an industry-wide shift toward providing institutional-grade investment access and due diligence capabilities. Cerulli expects this service expansion trend to persist as private markets continue maturing and new investment opportunities proliferate in the space. This evolution positions advisors to compete by delivering comprehensive alternatives platforms rather than relying solely on traditional wealth management services.
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