Managers of alternative asset classes are busy working out how to cater to emerging client bases, with private wealth increasingly on their radars.
While institutional investors were early to invest in areas such as infrastructure and private equity, sources said engagement with private wealth is, in most cases, behind the curve.
But that is changing. A number of money managers running alternatives strategies said they are picking up interest from, and consequently working hard to adapt, to new interest from high-net-worth individuals.
"The interest from the wholesale channel in alternative strategies is definitely increasing with private banks, family office and wealth managers playing a larger role as aggregators and allocators of assets," said Gihan Ismail, head of strategic partnerships at multiboutique investment manager Fidante Partners in London. She said this is particularly true across European markets as "many of these institutions play important roles in markets where the definition between retail and institutional is more blurred."
And the opportunity is huge: The Boston Consulting Group's Global Wealth 2018 report said global personal financial wealth grew 12% in 2017 to $201.9 trillion. The most affluent segment, those with more than $20 million, represented $26 trillion of investible wealth at the end of 2017.
But grabbing even a slice of these assets is taking work and adaptation. In some cases, it means managers must place a lot of trust in intermediaries such as private banks.
"One of the newer areas of traction for us is private wealth," said Kate Campbell, London-based co-head, European distribution at AMP Capital Investors Ltd. "Over recent years, infrastructure equity has generally done what it said it was going to for the institutional world," she said, in terms of delivering sustainable growth, cash yields and having defensive characteristics. "Now the private wealth space is coming to us. We are starting to work with aggregators across Europe who gather small tickets from these clients," Ms. Campbell added.
Some money managers have chosen to partner with intermediaries to cater to high-net-worth investors. AllianceBernstein LP on July 31 said it had agreed with iCapital Network to provide a white-label platform enabling these types of investors at registered investment advisers and multifamily offices to access the $540 billion money manager's alternative investments platform.
iCapital — a financial technology platform — will help AB to simplify access to its alternative strategies and to streamline subscription processes and performance reporting.
Jeffrey A. Levi, principal at Casey Quirk, a practice of Deloitte Consulting, in Darien, Conn., said there has been "significant institutionalization within retail markets. In many places the sophistication of those buyers has started to mirror the institutions, and many consultants advising wealth platforms have seen a lot of consolidation among the decision-makers in the wealth space," he said, citing the coming together of multifamily offices, financial advisers and registered investment advisers. "Buyers are starting to emerge who are seeking more sophisticated expertise," Mr. Levi said.