Wealthy investors are expected to look beyond stocks and bonds, prompting private banks to expand offers and experiences.
The shares and bonds circulated publicly have been major investments over the past fifteen years, but wealthy investors are increasingly looking for alternatives to the public securities markets.
Whether this is fearful of general stocks exaggerated, this inflation will rise again, or that the fluctuations of the market will increase the advancement, the wealthy investors want to change the traditional.
Special banks are preparing to help provide alternatives.
“Historically, (private investors) (private investors) has not been allocated with alternative assets compared to institutional investors, but we are witnessing a strong rise in demand,” says Mark Sogterlin, head of alternative investments at Bank of America private bank and Mier Lynch. “We believe that most of our customers will be better with allocating alternatives about 25 %.”
This would represent a major shift in investment behavior for high -value investors (HNW). According to a report issued in 2023 by Bain & Co Consulting, investors and family offices are highly accurate with more than $ 30 million in assets have already invested 22 % of their wealth in alternatives. But those who have between $ 5 million to $ 30 million in assets allocate only 3 % for alternatives and those who have a million dollars to only $ 5 million 0.7 %.
With the presence of individual investors and family offices, more than half of the assets of global assets of $ 289 trillion, this represents a large group of capital for alternative asset managers. It also represents a major challenge for private bankers who aim to help their HNW customers move in new investment markets.
Preqin, a primitive research company, expects that alternative assets be under management – including private and credit shares, investment capital, hedge funds, real estate, and infrastructure investments – rise from 16.8 trillion dollars at the end of 2023 to $ 29.22 trillion by the end of 2029.
While Preqin expects to grow in all sectors of the alternative market – including hedge boxes, which suffered from a 2022 player when both stocks and bonds have taken losses in double numbers – private stocks and credit are the most markets.
“There was a huge amount of attention in private stocks and private credit along the wealth spectrum,” says William Watt, an analyst at Datos Insights who focuses on wealth management. “I expect strong demand to continue for a few years as long as the economy will remain in good health.”
Kinds, gentle offers
Take the demand for nice investment offers from private asset managers.
“The prominent shepherds realize the opportunity and have become better partners with investors,” said Soglerin. Big companies such as Blackstone Group, KKR & Co and Apollo Global Management have made minimal investment money, lower fees, larger transparency and even a degree of liquidity (see sidebar). Investors get better access to the best strategies on better terms. Everything changes for the benefit of the final investors. “
Some banks launch separate entities to help sponsor investors in private markets. Deutsche Bank Partners DB Investment Partners launched a little more than a year ago to give institutional investors and HNW access to private credit investments. With floating interest rates, these vehicles have been in demand over the past few years. DB Investment Partners works independently and Deutsche maintains its current private credit.
While the demand for alternatives has been developed in North America and Europe, Asia is also a substitute.
“We see more requests from our customers through the alternative assets group,” says Che Jeon Win, head of alternative investments at Singapore Bank. “It is not only about reducing risks, but also generating alpha and reaching opportunities that you cannot get in public markets.”
The bank, previously known as the Asian Bank, employ people with institutional backgrounds and experience in alternative markets. About 500 relations managers get internal training in the classes of alternative assets and how to integrate them into the client governor.
“We have been able to expand the investment world to our customers and provide access to more investment solutions and investment strategies,” says Chi.
The bank does the same for its financial intermediary customers. Last year, a digital platform in partnership with iCapital Global Fintech launched the independent asset managers (IAMS) with more than 1,600 funds from 600 companies. The site also provides research and tools for due care, reports and performance updates on money investments.
“We are the first engine in this space in Asia,” says Chi. “We give Iams the ability to choose managers and investment strategies and choose logical investment strategies for their customers.”
Main discrimination
For private banks, helping wealthy customers increase their exposure to alternative assets smoothly and successfully will be a major discrimination in the wealth management industry. While most of them have experience in investing in alternatives to their richest customers, the expected shift to alternatives to HNW customer space will be a major challenge for companies.
“There is a great chance of private wealth, but banks need to be prepared to grow,” says Trish Halper, Northern Trust Family Manager. Halper customers were investing in decades of time with an average of allocations ranging from 30 % and 50 %. “The family offices were early in the field of alternatives, and investors of high value in the network.”
Work burden for financial advisors is much heavier with private market assets than shares and bonds circulated publicly.
“The dispersion of returns is much wider in private markets more than public markets, which makes the manager’s choice really important,” says Halber. “The banks need to customize sufficient resources of strong due care because accessing information and data is much lower in private markets.”
Sources of quality investments are just the beginning. The governor of private assets must be diverse across sectors, wines and financial sponsors to reduce risks; Investments and asset managers themselves must be monitored; Capital call obligations must be implemented; Distributions must be managed when investments are ripe.
“There are a lot of operational and administrative tasks participating in private investments,” Halper notes.
The growth in the market of alternative assets is a major shift in the private banking scene. Banks in all parts of the global markets invest in technology and talents to deal with transition and ensure that allocations help improve customer governors and achieve their financial goals.
“Capital markets have evolved,” says Sogterin at Bank of America. “For investors who really want a varied wallet, if they are not invested in private markets in both stocks and fixed income, they are not in a large part of the capital market now.”
