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Managers look beyond the traditional client base: Cerulli Associates

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As fundraising among large institutions has run dry, demand among retail and small institutional investors has surged for private investments, says the US team at Cerulli Associates. Both factors are driving alternative asset managers’ interest in exploring client segments beyond the traditional large institutional investor.

The retail investor segment, which includes high-net-worth, ultra-high-net-worth, and family-office channels, among others, accounts for just over 49 per cent of total assets managed in the US, the firm says. This represents a new high in marketshare for the retail client segment, while the institutional channel has lost marketshare in eight of the last 10 years. As the retail market is set to overtake the institutional market, asset managers will need to align their client strategies with this macro trend, the firm says. 

According to the research, 60 per cent of alternative asset managers says initiatives to target high-net-worth investors are more important than most other initiatives. Many of these initiatives involve creating intermittent liquidity products more suited to the needs of retail investors. Among these products, 64 per cent of alternative investment managers say interval funds represent a large opportunity for them, more than any other investment vehicle.

“Interval funds present a number of benefits to retail investors in addition to their enhanced liquidity mechanisms,” says Chris Swansey, senior analyst. “Unlike non-traded REITs, interval funds are not constrained to a singular asset class and often offer a mix of asset classes. They also are a registered product with lower investment minimums,” he adds. 

Overall, intermittent liquidity products may provide an easier way for alternative managers to access retail investors and smaller institutions, the firm says. “While apparent growing pains with intermittent liquidity products still exist, it is clear that, in the long run, the benefits of the products could represent an enormous opportunity for alternative investment managers,” concludes Swansey.

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