This article is from the Australian Property Journal archive
CLIENTS of wealth managers, portfolio managers, financial advisors and financial planners have been significantly upping their allocations to alternative investments over the last two years.
According to a global study by Ortec Finance, 75% of wealth managers and financial advisors report their clients have increased their allocation to cash over the past two years, with 13% seeing a dramatic increase.
The global study surveyed wealth managers and financial advisors whose organizations collectively manage approximately $750 billion.
While 23% say their clients have maintained the same allocation to cash, with just 2% replying their clients have decreased their allocation.
Over the last year, over 65% say they have been investing their clients’ money in a wider range of asset classes that typical with 88% saying they have increased their clients’ overall allocation to alternatives.
“Our research shows a significant move into cash and alternatives over recent years, with more clients set to increase their allocations into alternatives in the near future,” said Ronald Janssen, managing director of goals-based planning at Ortec Finance.
“This is quite a significant shift in clients’ investment strategies so it’s essential that advisors have the right tools in place to effectively review investments to ensure they are on track to achieve their personal goals.”
Additionally, at 55%, more than have of respondents believe contributions from high-net-worth individuals, wealth managers and retail investors will reach 10% of the alternative asset management industry’s global AUM by 2025 or 2026.
79% of clients have increased their allocation to private equity in the past 12 months, with 76% who have invested more in private debt and 75% who have increased their allocation to hedge funds.
While over the next two years, 90% of wealth managers and financial advisors see their clients increasing their allocation to private equity, followed by 87% who see their clients increasing allocations to venture capital.
83% envisioning their clients investing more in private debt and 80% in infrastructure over the next two years.
68% of wealth managers and financial advisors named robust track record over the last few years of alternatives as the reason for increasing clients’ allocations to the asset class.
With 66% siting there being more opportunities to invest in these asset classes and 47% saying they believe the asset class can offer more attractive returns with lower correlation to equities markets.
It is estimated that contributions from high-net-worth individuals, wealth managers and retail investors currently account for around 5%, or roughly $750 billion of the alternative asset management industry’s global AUM.
With 55% of advisors believing this will double to 10% – to $1.5 trillion – in 2025 or 2026, with 8% believing this could be the case by 2023 and 20% betting on 2024.
