It appears that public and private, illiquid private equity funds are increasing on the radar of financial advisors.
Regarding alternative investments that mainstream financial advisors could sell, first it was nontraded real estate investment trusts, which hit the market more than 20 years ago. REITs were followed by nontraded business development companies after the 2008 credit crisis.
Private equity or leveraged buyout funds have traditionally been sold to institutions. But now, with retail investors' attention on private markets, thanks in part to announcements like the NFL this week allowing private equity managers to invest in teams, product sponsors are increasingly reaching into broker-dealers as a channel to sell private equity funds or private equity private placements.
That effort is clearly having an impact on capital raised for such private equity funds. According to Robert A. Stanger & Co. Inc., for the first seven months of the year, private placement investments that include private equity and infrastructure funds, raised $11.3 billion as compared to $10 billion for the full year of 2023.
Blackstone Private Equity Strategies Fund and the KKR Private Equity Fund, or K-PRIME, are two such examples.
"The appetite by financial advisors for private equity funds is super high right now," said one senior industry executive who spoke privately to InvestmentNews about the matter. "And advisors are taking meetings to understand what private market investing is all about."
"Advisors are concerned with the volatility in the public markets as well as the limited number of public companies to invest in," said the executives. "They see the brands of the sponsors, so they know it's a product with the performance for an institution."
Meanwhile, nontraded BDC fundraising is up nearly 121% through July compared to the same period in 2023, with nontraded REIT fundraising is down 59%, according to Stanger.
“After a robust first half of the year in alternative investment capital formation, we are continuing
to see strong fundraising by non-traded BDCs, interval funds and all categories of private placements," said Kevin Gannon, Stanger's chairman.
The top fundraisers in the alternative investment space through July are: Blackstone, $10.7 billion; Cliffwater, $7.7 billion; Blue Owl Capital, $6.3 billion; Ares Management Corp., $5.8 billion; and Kohlberg Kravis Roberts & Co., $5.4 billion, according to Stanger.
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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