Advisors Favor Private Equity in Alternatives, Face Liquidity Challenges

Financial advisors are increasingly incorporating alternative investments into client portfolios, driven primarily by the opportunity to attract new business. The 2025 iCapital Global Advisor Survey, which gathered responses from 603 registered financial professionals across nine countries, reveals that approximately 20% of U.S. advisors identify client growth as their leading motivation for adding alternatives to their service offerings. This finding underscores how alternatives have become a competitive differentiator in wealth management, particularly as institutional and high-net-worth clients demand diversification beyond traditional equities and fixed income.

The survey demonstrates clear hierarchies in advisor preference among alternative asset classes. Private equity dominates with 66% of advisors expressing interest in allocating client capital, followed closely by private credit at 54%—both substantially outpacing other alternatives. Hedge funds and real estate each capture 54% and 44% of advisor interest respectively, while venture capital trails at 26% and other real assets at 21%. The strong preference for private equity and private credit reflects both their perceived return potential and their established track record with institutional investors.

Evergreen funds—structures offering ongoing liquidity without fixed fund lifecycles—are expected to constitute a material portion of alternative allocations. A substantial 77% of advisors forecast that evergreen funds will represent 11–15% of their clients' portfolio allocations within the next two years, with an additional 22% projecting 5–10% allocations. This anticipated growth suggests a structural shift toward more flexible alternative investment vehicles.

Despite enthusiasm for alternatives, significant obstacles impede broader adoption. Liquidity assessment emerges as the dominant challenge, with 55% of advisors citing difficulty in accurately evaluating liquidity and associated risks. This concern is critical given that private equity and private credit—the most favored alternatives—traditionally feature extended holding periods and limited exit opportunities. Additionally, 53% of advisors struggle to model how alternative allocations influence overall portfolio construction and risk characteristics, a fundamental requirement for prudent fiduciary management. Supply-side constraints compound these issues: 51% of advisors report insufficient access to institutional-grade alternative investment products and pre-built model portfolios incorporating alternatives, limiting their ability to scale alternative offerings efficiently.

These findings suggest that while advisor appetite for alternatives remains robust, the practical implementation challenges—particularly around liquidity transparency and portfolio integration—require additional industry infrastructure and standardization to unlock fuller market adoption.