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Amid lingering concerns that some corners of the bond market don’t always provide needed diversification and reduced correlations to equities, alternative assets (alts) are increasingly on advisors’ and investors’ radars.
Conversations about alternative investments are gaining in frequency at a time when both gold and bitcoin are notching record highs, but the alts universe expands well beyond commodities and cryptocurrency. Advisors, particularly those that cater to high-net-worth clients, are already aware that many affluent folks cobble together art or wine collections for the dual purposes of joy and return on investment.
Art and wine are just two examples and they’re embraced as hobbies and investments by younger clients, but those clients are expanding into other nuanced alts in an effort to diversify portfolios and juice returns. In fact, alts, which also include private credit and private equity, are climbing the ranks among retail investors’ preferred investment choices, confirming advisors need to bolster their alts knowledge and offerings.
Put Alts on the Agenda
A new survey by Lansons indicates the intersection of alts and retail investors could be a $1.3 trillion addressable market, indicating significant growth potential for advisors that address clients’ alts interest and demands.
“The survey found that one in four Americans (26%) are either planning to invest in alternative assets within the next few years or will strongly consider it. Additionally, 48% of respondents expressed cautious interest, saying they might invest in alternatives in the near future,” according to the research firm.
Of note to advisors is the point that while retail investors are interested in alts, it can be inferred from the Lansons study that many are merely dipping their toes into the asset class or haven’t yet even done that because they’re concerned about their own levels of awareness and trust in alts. Those may be among the reasons why the percentage of U.S. investors owning alts declined from 2022 to 2024.
On the other hand, advisors should note that clients are alts-enthused are willing to allocate more than a quarter of their portfolios to the asset class. That’s another sign advisors should be discussing alts with clients because some may want too much alts exposure while some likely don’t have enough. Additionally, data confirm this is an asset class about which younger investors are highly enthusiastic.
“When it comes to alternative investments, younger generations are more likely to invest. While 6% of Gen Z and 4% of Millennials currently invest in alternative assets, only 5% of Gen X and 2% of Baby Boomers do so,” adds Lansons.
Clients Are Likely Alts-Pliable
Another important point in the Lansons survey is that retail investors don’t need a lot of convincing and arm-twisting to get interested in alts. Broadly speaking, they’re already there and aware that alts can improve a portfolio’s performance over the long haul.
So while advisors don’t need to spend a lot of time making a case for alternative investments, they need to do some myth-busting because, as noted by the Lansons study, half of retail investors view alts as possessing above-average volatility while 20% see the asset class as ripe for fraud and scams. However, once investors put some capital into alts, they’re likely to add to that amount in the future.
“Interestingly, many investors say that the ability to make a small initial investment into alternative assets would make them more likely to make larger investments down the road,” concludes Lansons. “This reveals an opportunity for alternative asset investment platforms to attract greater retail participation by touting their relatively low thresholds to investment.”
Bottom line: there’s a sizable growth opportunity available with alts and clients are open to these ideas, so why not make the effort?
Related: Another Bitcoin-Themed Bond ETF Could Be on the Way