Alts Managers Look to Intermittent Liquidity Product to Reach a Broader Client Segment

May 2, 2023 — Boston

Amid a challenging fundraising environment, managers shift focus to the retail segment with intermittent liquidity offerings

As fundraising among large institutions has run dry, demand among retail and small institutional investors has surged for private investments. Both factors are driving alternative asset managers' interest in exploring client segments beyond the traditional large institutional investor, according to the latest Cerulli Edge—U.S. Institutional Edition.

The retail investor segment, which includes high-net-worth, ultra-high-net-worth, and family-office channels, among others, accounts for just over 49% of total assets managed in the U.S. This represents a new high in marketshare for the retail client segment, while the institutional channel has lost marketshare in eight of the last 10 years. As the retail market is set to overtake the institutional market, asset managers will need to align their client strategies with this macro trend.

According to the research, 60% of alternative asset managers say initiatives to target high-net-worth investors are more important than most other initiatives. Many of these initiatives involve creating intermittent liquidity products more suited to the needs of retail investors. Among these products, 64% of alternative investment managers say interval funds represent a large opportunity for them, more than any other investment vehicle.

“Interval funds present a number of benefits to retail investors in addition to their enhanced liquidity mechanisms,” says Chris Swansey, senior analyst. “Unlike non-traded REITs, interval funds are not constrained to a singular asset class and often offer a mix of asset classes. They also are a registered product with lower investment minimums,” he adds.

Overall, intermittent liquidity products may provide an easier way for alternative managers to access retail investors and smaller institutions. “While apparent growing pains with intermittent liquidity products still exist, it is clear that, in the long run, the benefits of the products could represent an enormous opportunity for alternative investment managers,” concludes Swansey.

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Note to editors

These findings and more are from The Cerulli Edge—U.S. Institutional Edition, 2Q 2023 Issue.

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