Opening Alts to a Wider Client Base

The economic environment has retail investors looking for solutions, and new platforms are evolving to meet the demand.

Illustration by RIA Intel

Illustration by RIA Intel

An emerging class of investment platforms is striving to connect retail clients to traditionally elusive private market strategies. For various reasons, alternatives have typically been difficult to access for retail investors, but firms like Yieldstreet are looking to provide advisors with increased and simplified access to the private market. The company is in the process of building out a time- and cost-effective infrastructure that will integrate with many turnkey asset management platforms — all designed to open up new opportunities.

“If you think about current wealth management platforms that offer alternatives, they’re limited to highly qualified purchasers, which is a very small portion of the population,” says Yieldstreet CEO and co-founder Milind Mehere. “We’re talking about high six-figure, seven-figure minimums. How many retail investors can afford to invest that much in one fund?”

In fact, retail investors have only about 2 percent of their portfolios allocated to the private equity market, compared to increasingly greater reliance on alternatives by institutional investors. Mehere believes that now is the perfect opportunity for retail to get in on the alts action.

“The 60/40 model is dead. Markets are generally faltering due to out-of-control inflation, rising interest rates, and the war in Ukraine, putting significant downward pressure on stocks,” Mehere says. “Now is the time to buffer your portfolio with alternative-type investments that may have a lower correlation to the broader market to help generate some wealth in this environment.”

Mehere anticipates that the next five years may see retail investors increase their alternative holdings to upwards of 20 percent of their portfolios. This would align with some $60 trillion in generational wealth transfer over the next 10 years, from Baby Boomers to Generations X, Y, and Z. Modern investors will rely much more heavily on data and technology to guide their investments, and platforms like Yieldstreet aim to facilitate access to private equity markets by providing investment managers and consumers with the tools and education to invest with confidence in an environment that’s likely new to them.

“We have a completely digital platform,” Mehere says. “We drill down on three phases of any investment: Pre-trade, trade, and post-trade, focusing on education throughout each phase. We provide all the right resources so that advisors can learn about various asset classes, their strategies, and why they should or should not be part of their portfolio. This is all done with a few clicks of a button.”

Yieldstreet offers access to tried and tested PE funds, leveraged buyouts, and real assets such as real estate. The platform leans into transparency, too, so users can stay informed.

“Anyone can see all of the investments we’ve made over the last seven years and how they’ve performed,” Mehere says. “We feel like it’s a great way to engage the consumer and make it all a little less scary.”

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