Affluent investors are scaling back their alternative investment ambitions even as access to the asset class widens, with growing knowledge of risk driving a measurable pullback in intended allocations, according to new research.
Escalent's Cogent Syndicated division’s annual Trends in Alternative Investments report tracks adoption rates, asset allocation and access preferences among financial advisors and affluent investors.
It finds that, paradoxically, the more investors learn about alternatives, the less they plan to put into them. Average intended allocations among investors familiar with alternatives have dropped from 26% to 19% since 2025, bringing client expectations closer to the 14% to 16% range that advisors typically recommend for liquid alternatives.
On the advisor side, the share of heavy users, defined as advisors with 10% or more of assets under management allocated to alternatives, is projected to double from 21% to 40% within two years. Average allocations are expected to climb from nearly 8% to around 11% over the same period.
"While demand for alternatives has remained resilient among advisors, liquidity constraints, high costs and complexity pose significant hurdles to expanded adoption. On top of these barriers, concerns around lack of knowledge and understanding of this asset class are prevalent," said Kristin Hall, senior product manager in Escalent's Cogent Syndicated division.
Just over a third of affluent investors, 37%, said they understand only "a little" about alternative investments. "This suggests awareness is expanding, but knowledge remains limited among clients, highlighting a clear opportunity for advisors to provide specialized guidance and education," Hall added.
That gap in understanding has a direct effect on who starts conversations about alternatives. Advisors, not clients, most often raise the subject. Among heavy users of alternative investments, however, clients initiate discussions 55% of the time, compared with 32% for light users, pointing to a link between investor familiarity and higher eventual allocations.
Millennials have been at the centre of the shift in sentiment. Initially drawn to alternatives in significant numbers, they are now recalibrating as market volatility brings risk into sharper focus.
"Initially, millennials wanted to jump on the bandwagon with high allocations toward alternatives. But, as they learn more about the risks, especially following recent volatility, they are becoming much more realistic," said Meredith Lloyd Rice, vice president in Escalent's Cogent Syndicated division. "As a result, we're seeing a shift in how millennials access these investment opportunities, with notable declines in platform-based access and advisors while continuing sustained interest in accessing via brokerage accounts."
The findings point toward a consolidating role for advisors as the alternative investment market matures. Those who invest in client education are likely to emerge as the primary access point for retail investors navigating an asset class that remains, for many, imperfectly understood.
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