Retail Investors Open to Alternatives in the Hunt for Higher Yields

  • U.S. retail investors are turning to alternative investment strategies, particularly private equity and hedge funds, to improve returns, as low interest rates and a crowded equities market have cramped the performance of stocks and bonds, the Financial Times reported.
A businessman holds a holographic logo that says "private equity."
Source: Alfa Photo/
  • Assets under management in these alternative assets which reached $10.3 trillion in 2019 among institutional investors globally, are forecast to hit $14 trillion by mid 2023, according to data provider Preqin. Recent U.S. regulatory guidance that will expand retail investor access to alternatives for 401(k) plans is likely to add to this trend.
  • Of the 300 advisers featured on this year’s Financial Times list of top registered investment advisers, less than half (128) have any client money invested in alternatives, with those firms allocating an average 7% of assets.
  • Tom Kehoe, managing director and global head of research and communications for the Alternative Investment Management Association, said that while alternatives can be a good way to diversify a portfolio, he warned that if an investor is forced to sell an alternative asset quickly, it could be at a steep discount.
  • “The average hedge fund was able to withstand that market correction better than equities did in the first quarter,” Kehoe said.

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