Key Takeaways
- • High-net-worth investors (those with $5M+ in investable assets) have increased alternative investment allocations from 7.7% of portfolios in 2020 to 9.1% currently, with expectations to reach 9.6% by 2024, according to The Cerulli Report.
- • Portfolio diversification and new growth opportunities are equally cited as primary drivers (50% each) for adding alternative investments, with advisors seeking to reduce volatility and capture private capital returns amid disappointing public equity and fixed-income performance.
- • Private equity leads growth intentions among HNW practices, with 50% of advisors planning increased allocations, followed by private real estate (45%) and direct investments/co-investing (32%); 94% or more of HNW practices expect to maintain or grow positions across all alternative strategies excluding hedge funds.
- • High-net-worth women show strong advisor-dependent interest in alternatives: 76% want advisors knowledgeable about non-traditional investments and 65% seek advisor recommendations on them, yet only 44% currently hold alternatives in their portfolios, revealing a significant implementation gap.
- • Alternative manager search and selection services among HNW practices have grown from 50% in 2016 to 67% in 2022, with Cerulli forecasting continued expansion as private markets mature.
Summary
Alternative investments have become a material component of high-net-worth portfolios, with accelerating adoption across the sector. HNW investors—defined as those with $5 million or more in total investable assets—have systematically increased their exposure to alternatives, growing from 7.7% of portfolio allocations in 2020 to 9.1% currently. The Cerulli Report projects this trend will continue, with allocations expected to reach 9.6% by 2024, signaling sustained institutional conviction in the asset class among affluent investors.
The momentum reflects two equally weighted strategic drivers: portfolio diversification and identification of new growth opportunities, each cited by 50% of advisors. According to research analyst Chayce Horton, advisors are responding to structural disappointment in traditional public equity and fixed-income returns by expanding into private capital and credit markets. This shift allows HNW investors to achieve better portfolio diversification while capturing returns in markets previously accessible only to qualified institutional players.
Within alternative strategies, private equity commands the highest growth intention, with 50% of HNW practices planning increased allocations over the next two years. Private real estate follows closely at 45%, while direct investments and co-investing opportunities account for 32% of expansion plans. Notably, 94% or more of surveyed HNW practices expect to maintain or grow their positions across virtually all alternative investment categories, with the sole exception of hedge funds—indicating broad confidence in the sector's trajectory.
High-net-worth female investors represent a particularly engaged demographic within this trend. Supplemental research indicates that 76% of HNW women desire advisors with expertise in alternative investments, and 65% actively seek advisor recommendations on non-traditional assets—a higher propensity than male counterparts at 58%. However, this demand-supply gap persists: only 44% of HNW women currently hold alternatives in their portfolios, suggesting significant untapped allocation potential contingent on advisor engagement and education.
As markets evolve, HNW practices are deepening their institutional capabilities around alternatives. Alternative manager search and selection services—a critical function for identifying and vetting private market investments—have expanded from 50% of HNW practices offering this service in 2016 to 67% in 2022. Cerulli expects this trend to accelerate as private markets mature and opportunities proliferate across credit, equity, and real asset strategies.
The momentum reflects two equally weighted strategic drivers: portfolio diversification and identification of new growth opportunities, each cited by 50% of advisors. According to research analyst Chayce Horton, advisors are responding to structural disappointment in traditional public equity and fixed-income returns by expanding into private capital and credit markets. This shift allows HNW investors to achieve better portfolio diversification while capturing returns in markets previously accessible only to qualified institutional players.
Within alternative strategies, private equity commands the highest growth intention, with 50% of HNW practices planning increased allocations over the next two years. Private real estate follows closely at 45%, while direct investments and co-investing opportunities account for 32% of expansion plans. Notably, 94% or more of surveyed HNW practices expect to maintain or grow their positions across virtually all alternative investment categories, with the sole exception of hedge funds—indicating broad confidence in the sector's trajectory.
High-net-worth female investors represent a particularly engaged demographic within this trend. Supplemental research indicates that 76% of HNW women desire advisors with expertise in alternative investments, and 65% actively seek advisor recommendations on non-traditional assets—a higher propensity than male counterparts at 58%. However, this demand-supply gap persists: only 44% of HNW women currently hold alternatives in their portfolios, suggesting significant untapped allocation potential contingent on advisor engagement and education.
As markets evolve, HNW practices are deepening their institutional capabilities around alternatives. Alternative manager search and selection services—a critical function for identifying and vetting private market investments—have expanded from 50% of HNW practices offering this service in 2016 to 67% in 2022. Cerulli expects this trend to accelerate as private markets mature and opportunities proliferate across credit, equity, and real asset strategies.
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