Private Fund Managers and the Retail Alternatives Phenomenon
A new wave of growth in alternative investing is underway, only this time it is encompassing the mainstream. Alternatives are migrating from institutional to retail markets, just as the use of asset allocation models did several decades back. Alternative strategies traditionally utilised by hedge funds are increasingly being packaged as mutual funds in the U.S. and as UCITS in the European market.
Based on the recent growth of hedge-style mutual funds, the blend of alternative strategies with the transparency, liquidity and regulatory oversight of regulated retail investment vehicles has growing appeal to financial advisors and their clients. Even in the defined contribution retirement plan market, which has tended to skew conservative, non-traditional investments, such as real estate investment trusts (REITs), are gaining traction, paving the way for an array of alternative strategies.
While the challenges involved in stepping across this chasm are not to be underestimated, a number of leading private fund managers have not only made the leap into the retail market, but have also committed to expanding their retail footprints in the years to come. This paper explores the opportunities this trend presents to private fund managers, as well as the decisions and hurdles they will need to navigate along the way.