Alternatives managers are exceptionally focused on gathering capital from retail advisors yet are missing an important and underserved client group—self-directed investors, according to Cerulli Associates, which believes that there is opportunity for asset managers that have the necessary scale in place to reach these self-directed investors.
Overall, alternatives managers rank direct-to-investor initiatives as less important than others—58 per cent report that reaching non-high-net-worth (HNW) investors directly is not an initiative for their firm, and 27 per cent say the same for reaching HNW investors directly. Currently, retail distribution of alternative investments is focused on sales via financial advisors, and especially those with wealthier clients.
Yet, direct platforms have amassed considerable investor assets and will control an estimated USD21 trillion in 2028, up from approximately USD11 trillion in 2022. “Asset managers with direct platforms have a built-in reach to direct-end investors. The platforms are already trusted by investors and not likely to incur steep customer acquisition costs,” states Daniil Shapiro, director. In addition, such platforms already have the clients—and a vault of information—for providing some exposure to alternative allocations.
A logical next step for such platforms is to leverage their scale with the provision of intermittent liquidity products. Interval funds, for example, are one step beyond the mutual funds that are already available for purchase on such platforms. Cerulli recommends that firms that already provide broad market exposures to direct end-investors evaluate whether or not they can expand access to less than fully liquid alternative investment offerings to existing investors.
“While offering self-directed investors access to alternative investments is a significant lift, the firms that already have such relationships should consider it, carefully evaluating the risks and costs (e.g., incrementally more burdensome subscription processes, helping investors navigate a lack of liquidity) against the benefits, which include their securing more attractive fees and helping their investors,” says Shapiro. “Their competitive advantage in offering such access can make it worthwhile and help individual investors avoid riskier exposures elsewhere,” he concludes.