Advisor alternatives boom spurs tech, partnerships, and new funds

Advisors are increasingly embedding alternative investments within strategic asset allocation frameworks to construct resilient, all-weather portfolios that balance long-term goals with risk tolerances. Julius Baer’s Jason Ng highlights that allocations to hedge funds, private equity, private credit, and private real assets each serve distinct strategic roles, emphasizing that these decisions should be driven by portfolio construction principles rather than short-term market fluctuations. This approach has evolved notably from 2021 to 2025, with growing demand shifting toward income-generating private credit and, more recently, defensive yet opportunistic strategies like hedge funds and private infrastructure, reflecting heightened market volatility and geopolitical uncertainty.

The traditional diversification benefits of stock-bond portfolios have diminished as correlations between these asset classes have become less reliable, prompting advisors to turn to alternatives for differentiated return drivers and improved risk-adjusted outcomes. Ng stresses the importance of evaluating success through both returns and volatility to achieve sustainable portfolio resilience, underscoring alternatives’ role in enhancing diversification amid evolving market dynamics.

The so-called 'Era of Convergence' marks a paradigm shift where advisors no longer treat public and private markets as separate silos but integrate them seamlessly within unified strategic asset allocation models. Brad Walker of CAIS emphasizes that technology-enabled platforms are critical in this transformation, enabling advisors to efficiently manage exposures across market types at scale. Furthermore, AI tools like CAIS’s assistant, CAISey, accelerate data synthesis and pattern recognition, freeing advisors to focus on personalized judgment and strategic decision-making.

Reflecting a strategic recalibration amid challenging macroeconomic conditions, advisors are deliberately shifting toward diversification and income-oriented alternative investments rather than pursuing higher risk. Walker notes increased flows into exchange funds, hedge funds, infrastructure, real estate, and tax-advantaged strategies, illustrating a nuanced asset allocation approach that balances defensive characteristics with income generation to navigate volatility and uncertainty effectively.

By mid-2026, a surge in adviser-driven demand for alternative investments—projected to add $2 trillion over five years—has catalyzed strategic partnerships between traditional asset managers and alternative firms, exemplified by alliances like Vanguard-Wellington-Blackstone and Goldman Sachs-T. Rowe Price. These collaborations enable the creation of multi-asset, all-in-one alternative funds that simplify private market exposure for smaller wealth advisers who prefer a streamlined, bundled approach rather than juggling multiple private market recommendations. This model not only broadens access for individual investors but also allows traditional managers to leverage their robust distribution networks and brand strength to increase fee revenue, while alternative specialists benefit from expanded reach.

The partnership trend extends beyond headline collaborations, with firms such as State Street and Apollo launching ETFs that blend public and private market allocations, and Capital Group teaming up with KKR to offer integrated public-private strategies. These moves reflect a broader industry shift toward multi-asset evergreen solutions tailored for the wealth channel, where each partner focuses on their core competencies—whether distribution scale or specialized private market expertise—to deliver more comprehensive and scalable products. As Wellington’s Trihy partnership illustrates, this approach is often more efficient than building capabilities organically, especially for large private markets managers who prefer to collaborate rather than develop liquid private market arms internally.

Interval funds have emerged as a favored vehicle for advisors seeking semi-liquid private market exposure, with assets reaching approximately $132 billion across 147 funds by the end of 2025. Independent registered investment advisors (RIAs) are driving this growth, attracted by interval funds’ fee structures that avoid performance fees and embedded commissions. This dynamic underscores the importance of clearly defined partnership roles, targeted distribution channels, and product offerings to effectively scale private market access beyond ultra-high-net-worth segments. As Cerulli’s Daniil Shapiro notes, success hinges on delineating responsibilities and aligning strategies to meet the nuanced needs of diverse wealth segments.

By mid-2026, technology platforms such as iCapital and CAIS have become indispensable in transforming how advisors integrate alternative investments into client portfolios. The industry focus has decisively shifted from debating the inclusion of alternatives to mastering their consistent delivery, with platforms embedding AI tools like Anthropic's Claude models and CAIS’s AI assistant, CAISey, to streamline advisor workflows and client engagement. This integration not only simplifies the operational complexities of liquidity, risk assessment, and compliance—which 59% and 53% of advisors respectively cite as top barriers—but also enables seamless convergence of public and private markets within unified, technology-enabled ecosystems.

CAIS’s recent $170 million capital raise and expansion to include nearly 40 new and existing asset managers, such as Apollo, Blackstone, KKR, and Goldman Sachs, exemplify how technology-enabled marketplaces are scaling to meet evolving advisor demands for diversified, income-oriented alternative strategies. Serving over 2,500 wealth management firms and 65,000 advisors managing approximately $8.5 trillion in assets, CAIS leverages its platform to reduce operational friction and facilitate broad access to more than 600 alternative strategies, effectively bridging public and private market investments in a single, efficient workflow.

As Walker aptly summarizes, technology is the linchpin enabling the convergence of private and public markets, allowing advisors to manage exposures efficiently and at scale without sacrificing personalized client service. AI-powered tools embedded within platforms like CAIS do not replace advisor judgment but instead alleviate administrative burdens, accelerating investment decision-making and freeing advisors to focus on delivering tailored advice. This paradigm shift underscores the critical role of innovative technology in reshaping advisor workflows and enhancing client engagement in the alternative investments ecosystem.

By mid-2026, advisor enthusiasm for alternative investments remains robust, with 89% planning to maintain or increase allocations and the share intending to boost allocations nearly tripling from 14% in 2025 to 39%. This bullish stance persists despite a cooling economic outlook, underscoring a shift toward viewing alternatives as a fundamental, long-term portfolio component rather than a cyclical play. However, operational hurdles such as liquidity assessment, risk exposure, compliance, and regulatory concerns have intensified, emerging as primary barriers that complicate product adoption and client communication.

Advisor preferences within alternative asset classes are evolving notably: private equity remains the dominant choice but with a slight dip, while real estate and venture capital are gaining traction—venture capital interest surged from 26% to 37%. Conversely, enthusiasm for private credit and hedge funds has waned, reflecting a recalibration of risk and return expectations amid recent redemption pressures in evergreen fund structures like non-traded business development companies and interval funds, which saw expected client exposure drop from 77% to 63% over two years.

Technology priorities among advisors are shifting to support these changing demands, with a growing emphasis on risk and performance analytics tools—rising to 51% from 43%—to better navigate the complexities of alternative strategies. Meanwhile, interest in automated subscription and redemption processes, custodian connectivity, and CRM integration has declined, signaling a move away from operational automation toward deeper analytical capabilities that address the nuanced challenges of liquidity, compliance, and client education in alternatives.

The industry narrative is transitioning from debating the inclusion of alternatives to tackling the operational complexities of delivering them consistently. As advisors have largely embraced alternatives, the focus now centers on overcoming barriers such as client education, documentation, and due diligence requirements, which remain significant hurdles. This evolution reflects a maturation of the alternatives ecosystem, where the challenge lies less in demand generation and more in refining infrastructure and communication to sustain growth.

Advisor-owned alternative assets in the U.S. are poised for a dramatic expansion, with Cerulli projecting a near doubling from $2.2 trillion to approximately $4.2 trillion within five years. This $2 trillion growth wave is driven by increasing advisor demand for private market exposure, particularly through semi-liquid vehicles like interval funds, which have already amassed $132 billion across 147 funds by the end of 2025. Independent RIAs are at the forefront of this growth, serving as the primary distribution channel and leveraging specialized wholesaler support to educate and onboard clients into these alternatives.

The evolving alternative investment marketplace is marked by strategic partnerships between traditional asset managers and private capital specialists, exemplified by collaborations such as Vanguard-Wellington-Blackstone and Goldman Sachs-T. Rowe Price. These alliances create multiasset alternative funds that bundle private credit, private equity, and other strategies into all-in-one solutions, catering especially to smaller wealth advisers who prefer streamlined allocations over managing multiple discrete investments. As Tayfun Icten notes, this 'one-shot alternatives allocation' model addresses resource constraints and enhances scalability for advisors.

Greater availability and access to alternative products stand out as the paramount growth drivers, with 93% of asset managers identifying this factor as critical over the next three years. This accessibility is complemented by shifting investor preferences, including a notable rotation from nontraded business development companies (BDCs) toward nontraded real estate investment trusts (REITs), which saw fundraising surge over 20% year-over-year through mid-2026. Despite liquidity concerns—cited by 61% of advisors as the top obstacle—increased transparency and income-generating potential continue to fuel advisor confidence and client demand for alternatives.