Research from Cerulli Associates estimates that US financial advisers currently allocate USD1.9 trillion to less than fully liquid private market strategies, a figure it expects to increase by USD1.8 trillion by 2029.
As asset and wealth managers look to their next leg of growth, mainstreaming product and simplifying access, a significant portion are interested in inclusion within asset allocation models or model-adjacent product.
Almost half (48 per cent) report multi-manager product as a best opportunity for inclusion, followed by paper models (44 per cent) and TAMP’s unified managed accounts (UMA) platforms (41 per cent).
Daniil Shapiro, director at Cerulli, says: “The push to create and distribute these models—integrating private market strategies—involves a broad range of participants across the financial ecosystem. Although asset and wealth managers will be the primary drivers of the effort to increase model use, turnkey asset management platforms (TAMPs) and alternative investment distribution platforms will play a critical role thanks to their provision of infrastructure across channels.”
Asset allocation models currently present approximately USD2.5 trillion in assets and are composed of daily liquid exchange-traded fund (ETF) and mutual fund product with growing separately managed account (SMA) strategy use.
Less than fully liquid alternative product introduces unique liquidity challenges. Schapiro expects inclusion of semi-liquid product as a component of a UMA to gather traction (models with alternatives).
However, the research finds investors and advisers will need educating if they are to achieve their private market ambitions in the retail market.
Both advisers (47 per cent) and asset managers (74 per cent) report that education about discussing alternatives with clients is valued more than any other type of education.
Portfolio construction guidance comes in a close second among both advisors (41 per cent) and asset managers (71 per cent).
Schapiro says: “Advisers are looking for help in understanding how multiple private market asset classes can come together and complement one another. Such tools can be extremely helpful even if advisors do not subscribe to them outright.”
