Alternative Investments for Wealth Management Portfolios

SUMMARY

  • High net worth and mass-affluent investors are increasingly allocating funds to alternative investment strategies in order to enhance returns, manage risk and diversify portfolios.
  • Two critical developments are driving the interest in alternatives: technological innovations that are increasing investor access to alternative strategies and greater sponsorship by asset managers of less liquid, registered investment companies.

High net worth and mass-affluent investors are increasingly allocating to alternative investment strategies in order to enhance returns, manage risk and diversify portfolios. We see several factors driving this trend across wealth management portfolios, including the desire for alternative sources of return at this late stage in the economic cycle and the expectation that future returns are likely to be lower across traditional asset classes.

Two additional, yet critical, developments are also driving the interest in alternatives: technological innovations that are increasing investor access to alternative investment strategies and greater sponsorship by asset managers of less liquid, registered investment companies (RICs).

Technological innovations

A host of financial technology (fintech) platforms have evolved in recent years that greatly reduce the operational challenges and the minimum investment amounts historically associated with alternative strategies housed in private vehicles. These platforms have greatly streamlined the subscription process, mainly through less onerous, paperless documentation and electronic signatures, and helped drive down minimum initial investment requirements to levels that cater to a wider array of individual investors.

Fintech platforms have also made it easier for certain qualified investors to access alternative investment strategies in private vehicles. PIMCO has recently formed a partnership with fintech firm Artivest to deliver technology and feeder fund solutions to wealth management advisors.