More than half of advisors are looking to increase their use of alternative investments and 95% of them are already using alts in their clients’ portfolios, according to the findings of a survey detailed in From Public to Private: How Advisors Are Using Alternative Investments, a research paper released on Tuesday by CION Investments.
The findings were based on a survey of 301 CION RIAs and RIAs using the YCharts platform, jointly conducted between April 7 and May 6 by CION, YCharts and Compound Insights, the research division of RIA Ritholtz Wealth Management affiliate The Compound Media.
Among advisors surveyed, 52% were interested in increasing allocations to infrastructure and real assets, which the report said reflects continued demand for differentiated sources of exposure.
According to the survey, 61% of respondents reported using evergreen vehicles and interval funds across “many” client accounts, while 50% of advisors surveyed said they used liquid alternative ETFs.
Hurdles Remain
Although alts adoption is widespread, advisors surveyed said they kept in mind the practical considerations that come with alts, CION said.
Liquidity concerns were cited by 61% of respondents as the top barrier to wider alts implementation, according to the report.
Michael A. Reisner, CION Co-Founder and Co-CEO, told Wealth Solutions Report by email that the most significant aspect of the findings was that “when advisors were asked which alternative they most want to add but haven't yet scaled, infrastructure and real assets topped the list — ahead of private equity.”
“The appetite for tangible assets isn’t niche anymore; it’s a leading edge of advisor demand,” he said.
The most surprising finding from the survey results, he said, was that “despite a year of headlines questioning the efficacy of semi-liquid structures, evergreen vehicles and interval funds are the most widely used alternatives formats among advisors today — more common than ETFs, listed BDCs, or drawdown funds.”
Reisner went on to say that the most disappointing finding was that “the gap between advisor interest and implementation isn’t about conviction — just 14% say alternatives lack a role in the portfolio. It’s about liquidity mechanics and complexity. That’s an education problem, not a demand problem, and it’s one CION and others are well positioned to help solve.”
In the news release, Reisner noted, “For decades, many alternative investment strategies were largely reserved for institutional investors and the ultra-high-net-worth investor class.”
But he said: “As access continues to expand, advisors have an opportunity, perhaps even a responsibility, to help clients understand the role these investments may play within a broader portfolio as well as the trade-offs that come with them. Our research reinforces the need for education, transparency and thoughtful implementation in helping investors capture today’s market dislocations so that they can pursue their long-term financial goals.”
The findings suggested that thoughtful alts implementation “requires aligning investment structures with clients’ objectives, time horizons and liquidity needs,” CION said in the release.
The survey also found that advisors use a variety of vehicles for alts, which CION said reflects marketplace evolution and the increasing pathways available.
The survey emphasized the importance of practical considerations for advisors, including an implementation framework, due diligence and ongoing communication around the role and trade-offs of alts, according to the report.
“The data paints a nuanced picture,” according to Callie Cox, Chief Strategist of Compound Insights and Chief Market Strategist at Ritholtz. “Advisors are expanding their use of alternatives, but they’re also clear-eyed about the considerations that come with them.”
Cox went on to predict, “That tension between opportunity and practicality may be one of the defining themes shaping adoption going forward.”
Jeff Berman, Contributing Editor and Reporter at Wealth Solutions Report, can be reached at jeff.berman@wealthsolutionsreport.com.
