Robert Picard, Managing Director and Head of Alternative Investments for Hightower Advisors joined Julie Cooling, Founder and CEO of RIA Channel to discuss private market trends, allocation considerations and the expansion of advisor access to alternative investments.
Hightower Advisors expects a roughly $1 trillion wave of capital to flow into alternative investments from high net worth and mass affluent clients. While university endowments, institutional investors and the ultra-wealthy have historically allocated a significant portion of their assets to private markets (private credit, private equity, and private real estate), this asset class has been somewhat out of reach for most investors. Recently, industry leaders such as Apollo, KKR and Blackstone, have built innovative solutions to expedite the democratization of private markets. High net worth and mass affluent investors now have access to private markets through new fund structures.
The 60/40 portfolio had performance challenges in 2022, showing the value that private market assets can add to portfolios for the mass affluent investor. Higher interest rates and rising interest rates represent a paradigm change, where investing is different today from what most investors have experienced over the course of their career. Combining the challenges of the traditional equity and fixed income markets with the new fund structures available to mass affluent investors, may make now a time where private market investments can add significant value to portfolios. Investors can now think of private equity as a complement to public equity investments, while private credit and private real estate complement public fixed income investments.
Hightower Advisors combines 126 autonomous advisory businesses. While each business has their own allocation strategies, the investments solutions team provides opportunities to invest in private markets strategies. The advisors may invest directly into private markets through Hightower, or may access the strategies through platforms such as CAIS, iCapital, or others. While many advisory firms have long invested in private markets, other firms are new to private investments and need education to understand the opportunities and how to carefully add them to client portfolios.
The opportunities to invest in private markets are vast, as 87% of US companies with revenues exceeding $100 million are still privately owned. Not only are private markets large, but they may also be less efficiently priced than public market investments. However, there is a large dispersion of returns across private market investments, so due diligence is critical before making any investment.