Key Takeaways
- • Fidante Adviser Markets Survey finds 77 per cent of advisers allocate up to 10 per cent of client portfolios to alternative assets, with infrastructure (21 per cent), private credit (17 per cent) and private equity (16 per cent) the key beneficiaries.
- • 36 per cent of surveyed advisers plan to increase allocations to private credit and infrastructure, according to the same survey.
- • Preqin and Morningstar data show manager return dispersion in alternatives is far wider than in public equities and fixed income, with top-quartile managers routinely outperforming median and bottom-quartile peers by a wide margin.
- • The article argues selecting the right active alternative manager is the most important decision when increasing exposure, prioritising track record, scale, team depth and governance.
- • Victor Rodriguez, chief executive of funds management at Challenger, frames alternatives as a core part of modern portfolio construction rather than a peripheral allocation.
Summary
Alternatives, spanning private equity and credit, venture capital, real estate, infrastructure and hedge funds, are now firmly part of portfolios, according to a Challenger-authored opinion piece published by IFA. The piece argues that traditional 60/40 portfolios are structurally changing as equity and bond correlations rise, leaving alternatives as a route to diversification and new sources of alpha. Institutional investors have led adoption, and advisers and sophisticated individuals are now following.
The Fidante Adviser Markets Survey supports this shift. Per the survey, 77 per cent of advisers allocate up to 10 per cent of client portfolios to alternatives. Infrastructure (21 per cent), private credit (17 per cent) and private equity (16 per cent) were the main beneficiaries, and 36 per cent of advisers plan to increase allocations to private credit and infrastructure. The article attributes this momentum to share market volatility, macroeconomic uncertainty and interest rate unpredictability, with defence and diversification cited as key drivers.
The central argument is that performance dispersion makes manager selection critical. Citing Preqin and Morningstar data, the article shows that top-decile, median and bottom-decile 10-year net returns across private equity, venture capital, real estate, infrastructure and natural resources are significantly wider than public equity spreads, and private debt returns are more dispersed than public fixed income. The piece notes that past performance is not a reliable indicator of future results. Liquid alternative managers following the same strategy can also diverge sharply due to trading skill, risk management and operational execution.
The article recommends that investors prioritise managers with a demonstrated track record across market cycles, sufficient scale given high barriers to entry, and well-resourced investment teams with specialised expertise. Governance is highlighted as paramount given the lower transparency of alternatives, with independent valuations, proper marking to market, conflict-of-interest management and liquidity management cited as key practices.
The Fidante Adviser Markets Survey supports this shift. Per the survey, 77 per cent of advisers allocate up to 10 per cent of client portfolios to alternatives. Infrastructure (21 per cent), private credit (17 per cent) and private equity (16 per cent) were the main beneficiaries, and 36 per cent of advisers plan to increase allocations to private credit and infrastructure. The article attributes this momentum to share market volatility, macroeconomic uncertainty and interest rate unpredictability, with defence and diversification cited as key drivers.
The central argument is that performance dispersion makes manager selection critical. Citing Preqin and Morningstar data, the article shows that top-decile, median and bottom-decile 10-year net returns across private equity, venture capital, real estate, infrastructure and natural resources are significantly wider than public equity spreads, and private debt returns are more dispersed than public fixed income. The piece notes that past performance is not a reliable indicator of future results. Liquid alternative managers following the same strategy can also diverge sharply due to trading skill, risk management and operational execution.
The article recommends that investors prioritise managers with a demonstrated track record across market cycles, sufficient scale given high barriers to entry, and well-resourced investment teams with specialised expertise. Governance is highlighted as paramount given the lower transparency of alternatives, with independent valuations, proper marking to market, conflict-of-interest management and liquidity management cited as key practices.
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