As the broad stock market stumbled in January, investors ran to alternative investments, buying a record amount — $10.5 billion — of nontraded real estate investment trusts, business development companies and other illiquid assets, according to investment bank Robert A. Stanger & Co. Inc.
Broker-dealers' sales of such alternative investments to kick off 2022 is a harbinger for the remainder of the year, according to Stanger, which is projecting $120 billion in sales of alternative investments this year, with broker-dealer sales of nontraded REITs and BDCs hitting $45 billion and $40 billion, respectively.
Sales of such products in January, a month in which the S&P 500 posted a decline of more than 5%, were up 175% from the $3.7 billion sold in January 2021, according to Stanger.
Sales of alternative investments, which in the past have entailed high commissions, have seen boom and bust cycles over the past 20 years, often linked to investors' concerns about the gyrating stock market. Over the past five years, a growing number of prominent Wall Street firms have begun selling products via independent broker-dealers, adding to sales.
"The space is now characterized by institutional quality asset managers including Blackstone, Starwood, Nuveen, KKR, Ares, Brookfield, JLL, Hines, Cantor, and Invesco, with a few more world class names coming, including Prudential," Stanger CEO Kevin Gannon wrote in an email. "The product is more transparent, with a regular appraisal process, liquidity of up to 20% of outstanding shares per annum, and less volatility than the public markets for real estate investments."
According to Stanger, during January, Blackstone raised $4.2 billion in the alternative investment space, including its Blackstone Real Estate Income Trust with $2.4 billion and its BDC, Blackstone Private Credit Fund, with $1.7 billion. Apollo Asset Management followed with $1.1 billion in its BDC, Apollo Debt Solutions, which recently broke escrow.
Stanger’s survey of top managers tracks fundraising for all alternative investments offered
via retail firms, including publicly registered nontraded REITs and BDCs, interval funds, nontraded preferred stock of traded REITs, Delaware Statutory Trusts, Opportunity Zone investments, and other private placement offerings.
For years, large Wall Street firms ignored the nontraded alternative asset industry, but that's no longer true.
At the end of last year, Apollo Global Management Inc. said it was buying the distribution channel — think an army of wholesalers — and the $5 billion in assets under management of Griffin Capital Co. Privately held Griffin Capital had raised $15.5 billion from investors since 1995 to seed its various credit products, real estate investment trusts and more recently interval funds, according to Stanger.
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