Financial Advisors Want Alts for Everyone, According to a New CAIS Survey

A new survey suggests that financial advisors want all retail investors to have the same access as accredited investors.

Angel Navarrete and Eduardo Leal/Bloomberg

Angel Navarrete and Eduardo Leal/Bloomberg

A majority of financial professionals, including RIAs, believe that all retail investors should have access to alternatives. Financial advisors already widely recommend that clients who meet the accredited investor requirements allocate to alternatives, according to a new CAIS survey shared with RIA Intel.

The survey of 303 respondents, 107 of whom identify as financial advisors, was conducted by Prosek Partners at the May 2022 Morningstar Investment Conference. The survey was conducted on behalf of CAIS, an alternative investment platform used by more than 5,300 advisory firms with more than $2.5 trillion in assets.

More than 83 percent of financial advisors surveyed say that all retail investors should have access to alternative investments — and 82 percent say that they’re recommending alts to accredited investors. One reason for this may be that 42 percent of those surveyed say the traditional 60/40 portfolio is not as effective as it once was, and 33.6 percent said that it’s not at all effective.

“When you look at the 60/40 portfolio right now, it’s not doing well. The question is where to find income distribution,’” says Abby Salameh, CMO and managing director of CAIS IQ. “Alternatives are the front-runner as a solution to that challenge.”

Investment in alternative assets has boomed in the past year, even as 2022 saw increased market volatility in traditional asset classes. Global alternative assets under management are expected to increase by 60 percent and reach $17 trillion between the end of 2020 and the end of 2025, far outpacing global GDP and inflation rates, according to alternatives data and research firm Preqin. Dave Lowery, head of research insights at Preqin, told RIA Intel that the more recent volatile macro conditions could accelerate the move toward alternatives, with any drop in value a potential buying opportunity.

CAIS’s own data showed significant growth during the first half of 2022, with the majority of flows across alternative asset classes on the platform seeing double- to triple-digit percent increases; private equity allocation was up 500 percent year-over-year on CAIS, and registered funds were up 400 percent year-over-year. Hedge fund allocations and private credit were up 30 percent and 40 percent, respectively, and real estate was up 80 percent year-over-year. The CAIS platform did see a decrease in digital assets, by 72 percent year-over-year, but all other asset classes and total asset flows increased year-over-year. The number of companies using CAIS has also doubled during the past 12 months to more than 5,300 advisory firms, the company told RIA Intel in May.

[Like this article? Subscribe to RIA Intel’s’ thrice-weekly newsletter.]

The first half of 2022 saw the launch of several alts-focused platforms such as Gridline, an alts platform targeting smaller funds, and AltExchange, a Plaid-like service that aggregates and organizes information from more than 50 alternative investment platforms for wealth managers.

However, high barriers to entry still exist for investors and advisors who want to diversify with alternatives. They’re expensive, complex, and illiquid, and many advisors don’t even consider them.

According to the CAIS survey, about 70 percent of respondents cite a lack of education about alternatives as a hurdle to investing in them, while 37.6 percent say high levels of administration and paperwork are barriers to using alts. In addition, 34 percent of advisors cite concerns around due diligence and compliance processes as difficulties when making allocations.

Salameh said that education for both advisors and investors is the key to breaking down some of the barriers that advisors encounter along the alts road. To that end, the Chartered Alternative Investment Analyst (CAIA) Association recently launched its own education platform to help educate financial advisors who want to learn more about alternatives, following a significant uptick of designation holders. CAIS itself launched a learning tool in 2019.

Holly Deaton (@HollyLDeaton) is a staff writer at RIA Intel and based in New York City.

Subscribe to RIA Intel’s thrice-weekly newsletter and follow the publication on Twitter and LinkedIn.

Related Articles
The alternative investment platform says it has a robust pipeline of exclusive agreements to build customized versions of itself for other wealth managers.
Among a growing number of alternative investment platforms, Gridline says its technology and the investments it offers will differentiate the company.
Extraordinary macroeconomic events are reviving attention to the world’s largest asset class.