Key Takeaways
- • Alternative assets under management have grown from $14.5 trillion in 2021 to $19.5 trillion at the end of 2024, with forecasts projecting nearly $30 trillion by 2029, according to EY's 2024 Global Alternative Funds Survey.
- • Wealthy individual investors represent the industry's next major growth priority, with 70 percent of surveyed institutional investors and alternative fund managers expecting continued expansion through 2025 and beyond; respondents anticipate overall investment increases of 22 percent over the next two years.
- • High-net-worth investors currently allocate only approximately 2 percent of their portfolios to alternative investments on average, indicating substantial untapped capacity and growth potential for asset managers.
- • Economic constraints—particularly the high cost of accessing and servicing wealthy clients—pose the primary obstacle to profitability in this segment, potentially limiting returns despite strong asset inflows from individual investors.
- • Fifty percent of survey respondents are actively working to diversify their alternative strategies, signaling a broader industry shift toward multi-strategy approaches alongside the geographic focus on North American wealthy investors.
Summary
Alternative investment managers are positioning wealthy individual investors as their primary growth engine heading into 2025, yet the profitability dynamics of capturing this market segment remain challenging. According to EY's 2024 Global Alternative Funds Survey of over four hundred institutional investors and alternative fund managers globally, the industry has experienced extraordinary growth: alternative assets under management expanded from $14.5 trillion in 2021 to $19.5 trillion by the end of 2024, with projections suggesting growth to nearly $30 trillion by 2029. This trajectory reflects a fundamental strategic pivot for the alternatives industry, which has historically been anchored by institutional clients now reaching their target allocation levels.
The survey findings reveal strong confidence in continued sector expansion, with 70 percent of respondents expecting growth trends to persist through coming years. Participants forecast a 22 percent increase in overall alternative investments over the next two years, demonstrating substantial appetite across the market. Notably, despite challenging conditions in private markets broadly, respondents reported that their alternative asset holdings outperformed expectations in 2024. Half of survey participants are actively diversifying their strategy offerings, indicating an industry-wide effort to broaden product portfolios alongside geographic expansion—particularly targeting high-net-worth investors in North America.
However, the profitability challenge is substantial. While wealthy investors represent an attractive addressable market—currently allocating only approximately 2 percent of their portfolios to alternatives on average—the economics of serving this segment differ markedly from institutional relationships. The primary obstacle to capturing and retaining wealth channel clients is economic rather than commercial: accessing, onboarding, and servicing high-net-worth individuals requires significantly higher operational costs than managing large institutional relationships. These structural cost pressures suggest that while alternative managers may successfully grow assets from wealthy investors, converting that growth into proportional profit gains will prove difficult absent substantial operational improvements or higher fee structures that the wealth channel may resist.
The survey findings reveal strong confidence in continued sector expansion, with 70 percent of respondents expecting growth trends to persist through coming years. Participants forecast a 22 percent increase in overall alternative investments over the next two years, demonstrating substantial appetite across the market. Notably, despite challenging conditions in private markets broadly, respondents reported that their alternative asset holdings outperformed expectations in 2024. Half of survey participants are actively diversifying their strategy offerings, indicating an industry-wide effort to broaden product portfolios alongside geographic expansion—particularly targeting high-net-worth investors in North America.
However, the profitability challenge is substantial. While wealthy investors represent an attractive addressable market—currently allocating only approximately 2 percent of their portfolios to alternatives on average—the economics of serving this segment differ markedly from institutional relationships. The primary obstacle to capturing and retaining wealth channel clients is economic rather than commercial: accessing, onboarding, and servicing high-net-worth individuals requires significantly higher operational costs than managing large institutional relationships. These structural cost pressures suggest that while alternative managers may successfully grow assets from wealthy investors, converting that growth into proportional profit gains will prove difficult absent substantial operational improvements or higher fee structures that the wealth channel may resist.
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