Nearly 9 in 10 Financial Advisors Plan to Increase Alternatives Allocations Over Next Two Years, CAIS and Mercer Survey Finds

Alternative asset managers identify private wealth channel as greater priority for their firm compared to two years ago

Amid ongoing market volatility and tightening monetary policy, nearly nine in 10 financial advisors (88%) intend to increase their allocations to alternative asset classes over the next two years, according to a recent independent survey conducted by CAIS and Mercer. The study also found that 89% of alternative asset managers and other financial professionals have identified the private wealth channel as a greater priority for their firm compared to two years ago.

Investors are increasingly turning to alternative investments to seek diversification, capital preservation, and/or uncorrelated returns. More than half of the 97 financial advisors surveyed (53%) are considering raising their alternative asset allocations to more than 15% over the next two years, while more than one fifth (21%) estimate their alternative asset allocations will exceed 25%. Only 8% of respondents do not plan to increase their alternative asset allocations within the same timeframe.

“We are increasingly seeing advisors target a three-dimensional portfolio that more closely resembles a 50/30/20 model across stocks, bonds, and alts,” said Matt Brown, Founder and CEO of CAIS. “These findings would seem to confirm that ‘The Great Reallocation’ of capital into alternative strategies is well underway within the private wealth channel.”

Financial advisors have historically under-allocated to alternatives compared to institutional investors, which often allocate between 30% and 50%. Aside from a lack of liquidity, advisors cited high levels of administration (51%) and concerns around due diligence (42%) as some of the greatest challenges to adopting alternatives in their portfolios. Additionally, three-quarters of the 101 asset managers and other investment professionals surveyed (75%) flagged a lack of education around alternative products and strategies as one of financial advisors’ greatest challenges in accessing alternative asset classes.

“These insights are consistent with findings from Mercer's Global Wealth Management Survey, which highlighted complexity and due diligence as critical considerations for investors that want to invest in alternatives. The key is to provide independent financial advisors with the same research and resources currently available to larger institutions, especially when it comes to enhancing portfolio allocations and mitigating risk through private market opportunities.” said Gregg Sommer, Partner and US Financial Intermediaries Leader, Mercer. “These survey results point to the importance of and demand for due diligence around alternative investment opportunities.”

As technology-driven platforms seek to enable more efficient access to alternatives for financial advisors, 85% surveyed have confirmed that their clients are looking to invest in either new products or structures within alternatives, while more than half (59%) said their clients are looking for both. At the same time, nearly seven in 10 asset managers and financial professionals surveyed (68%) revealed that their firms are rolling out these new investment products and/or structures to meet demand – including interval funds, 40 Act Funds, and non-traded REITS.

Financial advisors surveyed cited private equity (75%), private credit (73%) and real assets (71%) as the top-three alternative asset classes best suited to withstand current economic conditions.

Survey Methodology

The survey was conducted on October 17 – 19, 2022, at the CAIS Alternative Investment Summit, a three-day thought leadership event in Los Angeles, California. Respondents included registered investment advisors (RIAs), financial advisors, alternative asset managers, and other investment industry professionals. The data is based on responses from 198 respondents, 97 of whom identified as financial advisors.

About CAIS Summit

The CAIS Alternative Investment Summit is an annual three-day thought leadership event in Beverly Hills, California which is tailored to independent financial advisors. The October 17 – 20^th, 2022, event – which was CAIS’ inaugural Summit – attracted over 500 attendees including over 40 leading alternative investment managers and hundreds of independent financial advisors from RIAs and IBDs who oversee more than $2 trillion in assets.

About CAIS

CAIS is the leading alternative investment platform for financial advisors who seek improved access to, and education about, alternative investment funds and products. CAIS provides financial advisors with a broad selection of alternative investment strategies, including hedge funds, private equity, private credit, real estate, digital assets, and structured notes, allowing them to capitalize on opportunities and/or withstand ever-changing markets. CAIS also offers custom solutions for advisors seeking to create custom fund vehicles around ideas they source.

CAIS also provides an industry-leading learning system, CAIS IQ, to help advisors learn faster, remember longer, and improve client outcomes.

All funds listed on CAIS undergo Mercer's independent due diligence and ongoing monitoring. Mercer diligence reports and fund ratings are available to advisors on the CAIS password-protected platform. CAIS streamlines the end-to-end transaction process through digital subscriptions and integrated reporting with Fidelity, Schwab, and Pershing, which makes investing in alternatives simple.

Founded in 2009, CAIS, a fintech leader, is empowering over 7,400+ unique advisor firms/teams who oversee more than $3T+ in network assets. Since its inception, CAIS has facilitated over $20B+ in transaction volume as the first truly open marketplace where financial advisors and asset managers engage and transact directly on a massive scale. CAIS has offices in New York, Los Angeles, Austin, and San Francisco. For more information about CAIS, please visit www.caisgroup.com.

Securities offered through CAIS Capital LLC, member FINRA, SIPC.

About Mercer

Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 86,000 colleagues and annual revenue of over $20 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit mercer.com. Follow Mercer on LinkedIn and Twitter.

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