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Weighing the Upsides and Downsides of Alternative Investments

Posted on August 30th, 2023 at 1:09 PM
Weighing the Upsides and Downsides of Alternative Investments

From the desk of Jim Eccleston at Eccleston Law 

In its 2023 Financial Advisor Survey, iCapital surveyed 400 U.S. registered financial professionals. Those professionals, who either use or are considering using alternatives within the coming year, are exploring ways to diversify beyond traditional 60/40 portfolios.

According to FinancialPlanning.com, the study reveals a substantial increase in private market capital, rising from $4.5 trillion in 2012 to $12.4 trillion by the close of 2022. Traditionally, this capital originated mainly from institutional investors, as noted in Bain & Company's 2023 report on private equity, which highlighted that individual investors represented only 5 percent of assets under management in alternative investments. However, iCapital CEO Lawrence Calcano has observed a reduction in this gap due to the improved access that individual investors now have.

Advisors reveal both successful strategies as well as persistent challenges concerning alternative investments. According to the iCapital study, the utilization of alternative investments in the realm of individual investors is projected to keep growing.

Indeed, 95 percent of surveyed advisors intend to maintain or boost their allocations to alternative investments in the upcoming year, with 44 percent aiming for an increase. Among advisors overseeing a minimum of $500 million in assets under management (AUM), this percentage rises to 58 percent.

The iCapital study emphasizes the pivotal role of education concerning alternative investments. Despite the burgeoning interest, only a quarter of surveyed advisors consider themselves "very knowledgeable" about alternative investments, with an overwhelming 95% expressing a desire for educational content regarding alternatives.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

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