There is no sign of slowing down the breakneck pace of sales by financial advisors to clients of alternative investments. These investments include nontraded business development companies, nontraded real estate investment trusts, and interval funds, with one analyst pegging by year’s end a total of $200 billion, a new record.
Financial advisors routinely pitch such alternative assets to clients as a way to boost yields and diversify portfolios into investments that are not directly linked or correlated to the market. But alternative investments such as nontraded BDCs and REITs are typically more expensive than plain vanilla stock and bond mutual funds and exchange-traded funds (ETFs). And there’s no guarantee that investors are getting access to the best money managers in fields such as private equity, which has exploded as an industry in the past 20 years.
What’s clear is those potential hurdles are not slowing down the alternative investment sales boom, led by asset management firms like Blackstone and KKR & Co. Until a decade ago, such industry giants largely ignored retail brokerage investors with $1 million to $5 million to invest in favor of traditional clients - large institutions such as pension funds and insurance companies.
According to investment bank Robert A. Stanger & Co. Inc., fundraising – meaning sales – of alternative Investments totaled close to $102.3 billion through July. That’s compared to close to $138 billion in sales of alternative investments last year and $84 billion in 2023.
“We see $200 billion in sales this year,” said Kevin Gannon, CEO and chair of Stanger, in an interview last month. “The money has gone into BDCs and credit products because of higher yields. This space has always chased yield.”
Through July, sales of nontraded BDCs totaled $26.7 billion compared to a total of $35.4 billion in 2024. BDCs lend money to private companies - typically small and mid-sized companies that might have trouble getting loans from banks.
Some of the largest retail brokerage firms in the industry, including LPL Financial, Charles Schwab & Edward Jones, this year revamped their platforms of products to give financial advisors easier access to sales of alternative investments.
In May, Edward Jones started to its effort, beginning selling alternative investments, first to clients with $10 million or more in assets.
Meanwhile, in April, Blackstone, Wellington Management and Vanguard said they are working together to build a platform that features private, alternative assets for retail investors. That translates into tens of thousands of financial advisors who will have more access to alternative investments to sell to clients.
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