A new pulse survey by Blackstone suggests a strong focus on private markets among financial advisors in the coming year, with a strong majority planning to raise their clients' exposure in 2025.
Out of the 157 advisors surveyed by Blackstone, four-fifths (79 percent) anticipate boosting client allocations to private markets, compared to just 7 percent who expect to increase their exposure to fixed income or equities.
According to the alternative asset manager's Winter 2024 Pulse Survey, the push toward private markets is closely tied to diversification goals, with 55 percent of advisors saying their clients are prioritizing broader portfolio diversification.
"Many recognize that the correlation of stocks and bonds is less reliable than commonly assumed. Private markets can provide portfolio diversification beyond the traditional 60/40 allocation,” the survey noted.
The advisors polled also saw significant growth opportunities in digital infrastructure, with 52 percent naming it the sector best positioned to benefit from the rise of artificial intelligence. In contrast, the survey showed similar positive sentiment for healthcare and logistics among just 16 percent and 13 percent of advisors, respectively.
“With the emergence of increasingly advanced AI technologies, data center demand has risen 17-fold since 2019. We believe the demand for digital infrastructure will continue to grow into the future – a view shared by the majority of surveyed advisors,” the report stated.
Private infrastructure is another area of growing client interest, with nearly 60 percent of surveyed advisors reporting that their clients already hold some exposure to the sector. Among those, 40 percent said their clients have allocated between 1 percent and 3 percent of their portfolios to private infrastructure investments.
Last August, Blackstone submitted a filing to launch a private infrastructure fund aimed at accredited investors who are also qualified purchasers. The fund has gathered assets quickly in the intervening months, reportedly raising a billion dollars from clients as of January 8.
Blackstone's snapshot research comes shortly after another report by Fuse pointing to increased interest in alts among advisors. In that poll research, Fuse found four of the most niche alternative investment products – cryptocurrency/digital assets, interval and tender-offer funds, and hedge funds – are set to see a 15 percent increase or more in advisor usage over the next two years.
Despite aggressive plans for increased alternatives use, Mike Evans, director of BenchMark Research at Fuse Research, says underlying issues will hold back their near-term adoption, particularly in the illiquide and semi-liquid space.
"Liquidity concerns, limited accessibility beyond wirehouse advisors and advisors with large books of business, client suitability as well as operational and compliance challenges will all hinder the speed of adoption across the broader retail investor market," Evans said.
Most firms place a limit on advisors’ sales of alternative investments to clients in the neighborhood of 10% a customer’s net worth.
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