Advisors using alternatives still a minority despite business case, says Fuse

Advisors using alternatives still a minority despite business case, says Fuse
Adoption of emerging structures such as interval funds and BDCs remains low.
DEC 01, 2023

Alternative strategies and vehicle structures remain the domain of only a small minority of advisors, according to a new report.

While asset managers have been focused on these products for some time, and high-net-worth and institutional investors have been using them for decades, their presence in the retail space is expanding.

However, Fuse Research Network’s Advisor Trend Monitor Series Report found that adoption remains relatively low among financial advisors.

Almost one-third (31%) of advisors polled for the research use REITs within client portfolios with an average allocation of 5%, while the only other structures used by at least one in ten advisors are private equity and hedge funds.

“A segment of advisors is embracing alternative product structures; however, it remains a minority,” said Mike Evans, director of benchmark research at Fuse. “The overall usage of emerging structures like interval funds and BDCs is limited. This trend is also true for hedge funds, private equity, and private debt.”

BUSINESS CASE

The share of advisors using business development companies — a type of closed-end fund that makes investments in developing and financially distressed firms, typically using heavy leverage — is 9.7% with an average allocation of 3.9%.

For private debt, 8.6% of advisors include this in their client portfolios with an average allocation of 5.2%, and 7.4% of advisors use interval or tender offer funds with an average allocation of 5%.

Evans added that the business case for advisors expanding their use of alternative structures is clear. “The underlying demographics of advisors using these products are highly favorable — larger books of business, more experience and likely a team structure with dedicated due diligence,” he explained. “Firms must take a deliberate approach with any alternative vehicles because the sales cycle will be significantly longer.”

Latest News

Northern Trust names new West Region president for wealth
Northern Trust names new West Region president for wealth

The new regional leader brings nearly 25 years of experience as the firm seeks to tap a complex and evolving market.

Capital Group extends retirement plan services further with a focus on advisors
Capital Group extends retirement plan services further with a focus on advisors

The latest updates to its recordkeeping platform, including a solution originally developed for one large 20,000-advisor client, take aim at the small to medium-sized business space.

Supreme Court slaps down challenge to IRS summons for Coinbase user data
Supreme Court slaps down challenge to IRS summons for Coinbase user data

Crypto investor argues the federal agency's probe, upheld by a federal appeals court, would "strip millions of Americans of meaningful privacy protections."

Houston-based RIA Americana Partners adds $1B+ with former Morgan Stanley director
Houston-based RIA Americana Partners adds $1B+ with former Morgan Stanley director

Meanwhile in Chicago, the wirehouse also lost another $454 million team as a group of defectors moved to Wells Fargo.

Edward Jones to bring overlay management in-house with Natixis deal
Edward Jones to bring overlay management in-house with Natixis deal

The broker-dealer giant's latest acquisition agreement extends its push towards offering enhanced financial planning and investment management.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.