What’s stopping retail investors joining a $1.3T alts investment party?

Retail investors have some reticence about adding alternative investments into their portfolios, but it could be a lack of knowledge and understanding keeping them on the sidelines.

With assets on offer ranging from real estate and infrastructure to art, fine wine and other collectibles, there are plenty of choices and 26% of investors surveyed by consultancy firm Lansons said they plan to add alts to their portfolios in the next few years or at least strongly consider it, while 48% expressed cautious interest.

The firm calculates that if survey results were seen across the wider population, more than 62 million active investors with an average investment portfolio of $75K, allocating 26% to alts, that would be a $1.3 trillion growth opportunity for the market.

Estimates aside, the research reveals that 81% of respondents said they have never heard of retail alternative investment platforms or have limited knowledge of them. Just 19% said they were familiar with them or had invested using them.

Despite having limited knowledge of how to access these investments, survey respondents showed a clear, intuitive grasp of their benefits. Many recognized that alternative assets can diversify portfolios (53% agreed, while only 5% disagreed), offer potentially higher returns than traditional investments (43% agreed vs. 8% disagreed), and exhibit low correlation with conventional assets like stocks and bonds (47% agreed compared to 10% who disagreed).

Furthermore, only 30% of respondents feel confident in their ability to assess investment opportunities, and 48% would be more likely to invest if platforms demonstrated strong internal controls and corporate governance (48%), were approved by government regulators (47%), or had backing from reputable banks or brokerages (47%). 

“We found that simply explaining the concept of alternatives to those previously unfamiliar with them sparked immediate interest,” said James Schiavone, Head of New York Operations at Lansons. “What’s more, tens of millions of Americans already investing in stocks and bonds are eager to diversify with alternatives—representing a broad, largely untapped market for alternative asset platforms and fund managers.”