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Wealth Managers Increasingly Tilt Towards Alternatives – Mercer

Editorial Staff 7 October 2022


Perhaps unsurprisingly, given the volume of commentary, the survey found that a big shift is continuing with investors moving towards non-traditional assets and areas such as private capital.

A report by investment consultants Mercer has found that a growing number of wealth managers will be diversifying clients’ portfolios into less liquid areas such as property and private equity over the next 12 months. 

The study found that 73 per cent of managers are thinking of making such a move. Mercer’s 2022 Global Wealth Management Survey canvassed the views of 125 wealth managers in 26 countries

An overwhelming majority (86 per cent) of firms said the main reason for investing in private markets and other illiquid asset classes is for better yields or enhanced investment returns. 

Typically less liquid than listed stocks and government bonds, these “alternatives” usually offer higher yields – an attractive proposition in a world of high inflation. Last week, Preqin, the research firm, predicted that total assets under management among private capital investments could reach $18.3 trillion by 2027.

“It is encouraging to see the majority of wealth managers embracing and investing in illiquid and other alternative asset classes, citing yield and return potential. With traditional asset classes unlikely to generate the same level of returns in the next few years as they did in the past, it is critical that wealth managers’ client portfolios are positioned to seize the widest range of investment opportunities,” Amit Popat, partner at Mercer, said.

The survey found that there are barriers to investing in alternative and other illiquid assets. It showed that 71 per cent of wealth managers were concerned with lock-up periods, while 59 per cent said they did not have the necessary resources to perform the required due diligence before investing.

Elsewhere, 82 per cent of wealth managers noted an increase in client demand for ESG investments over the previous 12 months. However, only 20 per cent said that “enhanced opportunities to generate active return” was the main reason behind this.

As reported here, research firm Preqin has predicted that the amount of money invested in private capital – such as venture capital, private equity and debt – is expected to double by 2027 reaching $18.3 trillion.

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