Key Takeaways
- • Morningstar's 2025 Voice of the Investor study finds about a quarter of retail investors already hold private equity, rising to 35% among those with $500,000 or more in investable assets.
- • 56% of investors have invested in at least one type of alternative or private investment, with younger and higher-income households leading adoption.
- • Investors primarily seek higher returns and tax benefits from alternatives, while advisors use them mainly for diversification and risk management.
- • 28% of US advisors do not offer alternative investments, citing complexity and the need for added expertise, technology, and operations.
- • Morningstar's Direct Advisory Suite adds tools for screening private assets, identifying interval and tender offer funds, and incorporating private capital into its Portfolio Risk Score.
Summary
New investment vehicles such as interval funds have rapidly expanded retail access to private markets. According to Morningstar's 2025 Voice of the Investor study, about a quarter of retail investors already hold private equity investments, a share that climbs to 35% among investors with $500,000 or more in investable assets. Morningstar cautions that these vehicles carry risks, including higher average fees, widely used leverage, and potential liquidity constraints.
The research draws on Morningstar's Voice Of market research program, incorporating responses from more than 2,000 nationally representative individual investors and input from over 250 financial advisors across the United States. It finds that 56% of investors have invested in at least one type of alternative or private investment. Adoption is broadening across generations and income levels, with younger people and higher-income households increasingly embracing a wider range of alternatives. Even engaged investors typically hold only two or three alternative types, most commonly cryptocurrencies and private equity.
Investors and advisors value alternatives for different reasons. Investors seek higher returns and tax benefits, while advisors add alternatives primarily for diversification and risk management. Morningstar argues advisors must set clear expectations and keep alternatives aligned with client goals as interest grows.
Despite this demand, 28% of US advisors do not offer alternative options. Those advisors cite complexity as the main deterrent, noting that alternative offerings require greater expertise, technology, and operational support.
To address these challenges, Morningstar highlighted new capabilities in its Direct Advisory Suite. Features include filters that identify interval and tender offer funds within the closed-end fund universe, research tools for screening and comparing private assets, risk profiling that visualizes the percentage of private investments, and a Morningstar Portfolio Risk Score that now accounts for private capital funds.
The research draws on Morningstar's Voice Of market research program, incorporating responses from more than 2,000 nationally representative individual investors and input from over 250 financial advisors across the United States. It finds that 56% of investors have invested in at least one type of alternative or private investment. Adoption is broadening across generations and income levels, with younger people and higher-income households increasingly embracing a wider range of alternatives. Even engaged investors typically hold only two or three alternative types, most commonly cryptocurrencies and private equity.
Investors and advisors value alternatives for different reasons. Investors seek higher returns and tax benefits, while advisors add alternatives primarily for diversification and risk management. Morningstar argues advisors must set clear expectations and keep alternatives aligned with client goals as interest grows.
Despite this demand, 28% of US advisors do not offer alternative options. Those advisors cite complexity as the main deterrent, noting that alternative offerings require greater expertise, technology, and operational support.
To address these challenges, Morningstar highlighted new capabilities in its Direct Advisory Suite. Features include filters that identify interval and tender offer funds within the closed-end fund universe, research tools for screening and comparing private assets, risk profiling that visualizes the percentage of private investments, and a Morningstar Portfolio Risk Score that now accounts for private capital funds.
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