The Rise of Retail

The Rise of Retail

• Individual investors hold more total assets than institutions but allocate far less to alternatives (~3% vs ~23%), creating a significant growth opportunity for alternative managers, especially among younger, wealthier, U.S.-based investors.  

• Regardless of scenario, trillions of dollars ($9-19T in base case and mid-level scenarios) are expected to flow into alternatives from wealth channels over the next 10 years, with evergreen vehicles growing significantly, led by private credit by asset class and BDC and interval funds by product type. This data is predominantly US-focused, though promises to shift the alternatives industry for asset managers globally. 

• Potential concerns for wealth management may include fees, liquidity risk, gating, tax complexity, manager quality as it relates to accessibility and potential for bad actors, which could trigger regulatory responses. 

• Accordingly, institutional LPs worry retail participation will erode alpha opportunities, weaken fund caps, spark (excessive) regulatory response, increase competition for co-investments and secondaries, create conflicts of interest and extend hold periods.