Financial advisors are only getting started with alternatives. Cerulli Associates says the money flowing into these strategies through the advisor channel is nowhere close to peaking. That holds even after a rocky stretch of client redemptions in some of the best-known private market funds.
Key Takeaways:
- Cerulli projects advisor-held alternatives will grow by $2 trillion over five years, on top of $2.2 trillion already invested.
- Interval funds lead the field, reaching $132 billion across 147 funds by year-end 2025.
- After 2026's redemption wave, advisors want more transparency and education before allocating further.
The Cerulli report on U.S. Private Markets 2026 projected advisor-intermediated ownership of less-than-fully-liquid alternative investments will grow by $2 trillion over the next five years. That's on top of the $2.2 trillion advisors already hold today.
For an industry once built on scarcity and long lockup periods, that pace of growth changes the equation. Asset managers, distribution platforms and RIAs will need to rethink how these products get built, sold and explained to clients.
The Case for Alternatives
Diversification tops the list of reasons advisors give for adding alternatives to client portfolios. Cerulli found that 82% of advisors cite diversification as a goal.
Public markets have grown concentrated in a shrinking group of mega-cap stocks and a handful of investment themes. Advisors, in turn, see private capital as one way around that concentration.
Two-thirds of asset managers point to advisors' need to demonstrate value to clients as a growth driver, the firm reported. Another 57% cite demand for income-generating investments.
Interval funds and other private credit structures have gained traction for a simple reason. They can produce yield that traditional bond portfolios no longer offer as easily on their own.
Availability plays a role too. Cerulli's survey found that 93% of asset managers name greater availability and access to alternatives as a growth driver for the industry. That ranked ahead of every other factor the firm tracked over the next three years.
See more: 3 Alternative ETFs for Navigating Market Volatility
Interval Funds Take the Lead
Among the vehicles carrying that growth, interval funds have separated from the pack. These funds reached about $132 billion in assets across 147 funds by the end of 2025, according to Cerulli. Asset growth of 33% in 2025 outpaced the 25% increase in the number of funds launched.
RIAs have gravitated toward the structure for a practical reason. Interval funds typically skip the performance fees and embedded commissions found in other semi-liquid vehicles, Cerulli noted.
That preference also shows up in the distribution numbers. Cerulli found that 93% of polled asset managers see the independent RIA channel as one of their top five distribution opportunities. That's ahead of any other channel surveyed.
Not every structure is riding the same wave. Cerulli's research shows non-traded business development company (BDC) growth has moderated after a rapid run-up in assets. Non-traded real estate investment trusts (REITs), meanwhile, have started drawing renewed interest from investors.
See more: REIT ETFs: Real Estate’s Quiet Revival
A Bumpy Road Along the Way
The path hasn't been smooth. Cerulli's report points to a wave of redemption requests in 2026 tied to non-traded BDCs and interval funds. That's a reminder that semi-liquid does not mean fully liquid. Advisors who moved client money into these structures expecting stock-like access, for instance, instead ran into quarterly or annual withdrawal limits.
That friction has advisors asking for more information before they allocate further. Cerulli found that 44% of advisors say greater transparency into holdings and performance would push them toward more alternatives.
Another 40% ranked education on how to discuss alternatives with clients as the most valuable type of training. That ranks ahead of white papers or conference sessions.
Home offices felt the gap too. Cerulli believes many were caught off guard during the recent private credit redemption wave. Part of the reason: They lacked granular data on their own exposure.
Where Managers Go From Here
Closing that gap will likely depend on which firms figure out how to work together. Distribution is expanding beyond individual products into model portfolios, multi-asset vehicles and defined contribution retirement plans, Cerulli found. That expansion requires closer coordination among asset managers, technology platforms, turnkey asset management providers, trust companies and recordkeepers.
"Traditional asset managers are seeking differentiated capabilities that can enhance their product offerings and support more competitive value propositions," said Daniil Shapiro, a director at Cerulli.
"At the same time, private capital managers often lack the distribution scale and brand recognition required to penetrate retail channels, particularly beyond the ultra-high-net-worth segment and into the broader affluent market,” Shapiro added. “Working together, these firms can deliver solutions to retail investors that neither could provide as effectively on their own."
See more: The Case for Active Management in the Private Credit Market
Wholesalers remain the backbone of that effort. Cerulli found that 94% of asset managers still rely on their own wholesaling teams to distribute alternative products. That holds even as online marketplaces built for private funds have multiplied.
Shapiro cautioned that it's still too early to grade the partnerships taking shape across the industry.
"Clearly defined responsibilities and their scope (including channels, wealth segments targeted, and products offered) are extremely important," he said. "While it's too early to evaluate existing partnerships now, in the long term they will be defined by their execution."
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