Key Takeaways
- • Bank of America Private Bank and Merrill Lynch recommend a 25% allocation to alternative assets for high-net-worth clients, representing a significant increase from current allocations driven by concerns over equity valuations, inflation risks, and market volatility.
- • Ultra-high-net-worth investors and family offices with over $30 million in assets currently allocate 22% to alternatives, while investors with $5–30 million allocate only 3%, and those with $1–5 million allocate 0.7%, revealing a substantial gap between wealth tiers.
- • Individual investors and family offices collectively hold over half of the $289 trillion in global assets under management, creating an enormous untapped capital pool for alternative asset managers as allocations increase.
- • Private banks are expanding alternative investment platforms and expertise to meet rising client demand, positioning themselves to capture growth in the emerging shift away from traditional public securities.
Summary
High-net-worth investors are increasingly pivoting toward alternative assets as concerns mount over equity valuations, potential inflation resurgence, and future market volatility. This shift is prompting private banks to substantially expand their alternative investment offerings and internal capabilities to service this growing demand.
According to Mark Sutterlin, head of alternative investments at Bank of America Private Bank and Merrill Lynch, wealthy investors have historically been under-allocated to alternatives compared to institutional investors. The bank now recommends that most private clients maintain an allocation of approximately 25% in alternative assets—a marked departure from current practices and reflecting the strength of emerging demand in this segment.
Current allocation patterns reveal a pronounced disparity across wealth tiers. According to a 2023 Bain & Company report, ultra-high-net-worth investors and family offices managing assets exceeding $30 million already maintain 22% of their wealth in alternatives. This contrasts sharply with investors holding $5–30 million in assets, who currently allocate only 3% to alternatives, and those with $1–5 million, who allocate just 0.7%. These gaps underline the opportunity for private banks to drive adoption among mass-affluent and mid-market segments.
The scale of this opportunity is substantial. Individual investors and family offices collectively hold more than half of the $289 trillion in global assets under management worldwide. A meaningful reallocation toward alternatives would unlock significant capital for alternative asset managers while presenting private banking institutions with both an expansion opportunity and a competitive challenge. Success will require private banks to develop expertise, operational infrastructure, and risk management capabilities across increasingly complex alternative asset classes including private markets, private credit, and other non-traditional vehicles.
According to Mark Sutterlin, head of alternative investments at Bank of America Private Bank and Merrill Lynch, wealthy investors have historically been under-allocated to alternatives compared to institutional investors. The bank now recommends that most private clients maintain an allocation of approximately 25% in alternative assets—a marked departure from current practices and reflecting the strength of emerging demand in this segment.
Current allocation patterns reveal a pronounced disparity across wealth tiers. According to a 2023 Bain & Company report, ultra-high-net-worth investors and family offices managing assets exceeding $30 million already maintain 22% of their wealth in alternatives. This contrasts sharply with investors holding $5–30 million in assets, who currently allocate only 3% to alternatives, and those with $1–5 million, who allocate just 0.7%. These gaps underline the opportunity for private banks to drive adoption among mass-affluent and mid-market segments.
The scale of this opportunity is substantial. Individual investors and family offices collectively hold more than half of the $289 trillion in global assets under management worldwide. A meaningful reallocation toward alternatives would unlock significant capital for alternative asset managers while presenting private banking institutions with both an expansion opportunity and a competitive challenge. Success will require private banks to develop expertise, operational infrastructure, and risk management capabilities across increasingly complex alternative asset classes including private markets, private credit, and other non-traditional vehicles.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.