Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
The Shift to Alternative Assets: Overcoming Barriers and Exploring Opportunities
CAIS | Release | Jun 21, 2023
The recent market volatility, interest rate hikes, and a diminishing confidence in public markets have led to an increased demand for alternative investments.
Alternative assets are projected to constitute up to 24% of the global investable market by 2025, a significant increase from 12% in 2018.
- In a survey conducted by CAIS at the 2022 Morningstar Conference:
- 80.9% of financial professionals agreed that all retail investors should have access to such investment avenues. Traditionally favored assets are experiencing muted expectations and alternatives might provide a diversified method for investors looking to hedge against market instability.
- The survey included over 300 registered investment advisors and other industry experts.
- Nearly three-quarters (74.9%) of respondents believe that the SEC's definition of an accredited investor needs updating.
- Respondents anticipate private equity (49.8%), real estate (38.9%), and private credit (33%) to be the top-performing alternative asset classes in 2022.
- Rethinking the Traditional Investment Mix:
- Public market assets have been underperforming in recent years, with the traditional 60/40 portfolio (60% stocks and 40% bonds) delivering some of its lowest returns in the past two decades.
- About 33.6% of survey participants believe this investment strategy is no longer effective.
- Interestingly, 84% of investment or financial advisors are now recommending alternative investments to their clients who meet accredited investor requirements.
See: Celebrating 7 Years of Regulation Crowdfunding: 4100 Startups Now Valued at $60 Billion
- Obstacles to Accessing Alternative Investments:
- A significant 68.98% of respondents cited lack of education around alternatives as a major hurdle.
- Other obstacles include stringent qualification requirements, high administration and paperwork (37.6%), and concerns around due diligence and compliance processes (34.3%).
- Implications for the finance industry:
- This shifting landscape implies a need for financial advisors to stay updated and expand their knowledge of alternative investments. As more alternative products become available, advisors will need to ensure they're well-versed in these complex products to confidently recommend them to their clients. Moreover, calls for updating the SEC's definition of an accredited investor could potentially open up alternative investments to a broader demographic.
View the original release --> here
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