Alternative asset classes are opening up to wealthy families and individuals through the use of financial technology.
AllianceBernstein announced Tuesday that it agreed to allow registered investment advisory firms and multifamily offices to access its alternative investment offerings through iCapital Network, a fintech firm focused on “democratizing” alternative asset classes. Barings made a similar announcement last week, while JPMorgan Chase & Co.’s asset management group said in May that its agreement with iCapital would give clients of RIA firms a gateway to a select group of its alternative strategies.
While alternative investments in areas such as direct lending and private equity are popular with institutional investors, they are typically not found in the portfolios of individuals, who rely on a traditional mix of stocks and bonds to build their retirement savings. But RIA firms and family offices are increasingly turning to iCapital to select from a list of alternative strategies.
“With today’s lower expected return environment, potential for rising interest rates, inflationary pressures, and increasing volatility, it is critical for investors to maintain a well-designed allocation to alternatives that can help their portfolios weather uncertain markets,” Matthew Bass, AllianceBernstein’s head of global product strategy and alternatives business development, said in Tuesday’s statement. “This partnership with iCapital will allow us to better serve sophisticated investors and introduce new ways of generating alpha that were previously out of their reach.”
AllianceBernstein has about $540 billion in assets under management, including $24 billion in alternative strategies such as direct lending, commercial real estate, structured credit, and hedge fund strategies, according to the statement.
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New York-based iCapital provides high-net-worth investors the opportunity to invest in private equity and hedge funds at lower contribution minimums. Banks and asset managers use the firm’s fintech platform to increase the scale of their private investing infrastructure, according to the statement.
The agreement between iCapital and Barings, a global financial services firm with $306 billion of assets at the end of June, shows asset managers’ growing interest in attracting high-net-worth individuals to alternative strategies that have largely been restricted to big investors such as pension funds.
Barings has offered institutional investors exposure to traditional assets as well as alternatives such as private credit, private equity, real assets, and real estate. Now, through its new relationship with iCapital relationship, the firm said it would provide RIAs and their eligible clients access to certain of these alternative strategies.
“There aren’t many new pension funds being built these days,” Lawrence Calcano, chief executive officer of iCapital Network, said in a phone interview Tuesday. Private equity firms and hedge funds are “seeking to expand their investment base, and the high-net-worth channel is where they are going,” he said. Traditional asset managers, meanwhile, have been expanding into alternative strategies to attract more clients, Calcano added.
“We have been growing very dramatically,” Calcano said. Founded in mid-2013, iCapital now has more than $6 billion of assets tied to wealthy individuals in 130 different funds, he said.
J.P. Morgan Asset Management planned to begin its relationship with iCapital by offering high-net-worth individuals the ability to invest in its income-focused alternative asset strategies, according to the firm’s statement in May.
“Given the current rising interest rate environment, investors are looking for alternative sources of income that provide diversification to broader fixed income markets,” Anton Pil, managing partner of J.P. Morgan Global Alternatives, said in the statement.
J.P. Morgan Global Alternatives, the alternative investment arm of J.P. Morgan Asset Management, had more than $130 billion in assets at the end of March. The group’s strategies include real estate, private equity, credit, infrastructure, and hedge funds.