[TechCrunch Repost] Will alternative investments become a staple in all investors' portfolios?
Interview with Anna Heim, TechCrunch
I’m excited about how alts, when done right, can have a positive impact on more allocators’ portfolios.
Below is an excerpt of the interview in TechCrunch.
You can read the full interview in TechCrunch here (behind the paywall).
Thanks Anna for giving me the opportunity to share thoughts on why I believe that the 60/40 portfolio is no longer thanks to FinTech innovation that’s making it possible for alts to go mainstream and downstream.
Will alternative investments become a staple in all investors’ portfolios?
We no longer live in the era of the 60/40 portfolio, VC says
Anna Heim, TechCrunch
A 60/40 investment portfolio, in which 60% is invested in stocks and 40% in bonds, was long considered classic. But that’s no longer the case, as many investors are now diversifying beyond publicly traded assets.
Alternative investments, or alts, are a direct corollary to diversified portfolios. And they are not just for institutional funds: Individual investors too are showing increasing interest in this asset class, which encompasses all sorts of supports, from wine and watches to gold … and startups.
Startups can be on the receiving end of investments into alts, but some of them have also facilitated this trend. California-based fintech VC firm Broadhaven Ventures invests in companies on the tech side of enabling alts, with a portfolio including Allocate, Alongside, Alt, Capital (known until recently as Party Round), Caplight, Carta, Latitud, Pipe, Republic, Syndicate and others.
Talking to TechCrunch, Broadhaven co-founder and partner Michael Sidgmore said that when investing in the sector, the early-stage fund has “focused on helping to build out the alts ecosystem by investing in many of the enabling technologies across various areas of alternative investments.”
Sidgmore himself has spent a large part of his career in alts and launched a podcast and content platform called Alt Goes Mainstream in January 2021. We spoke with him about alts beyond crypto and what’s next for a space that’s seeing some of its tailwinds fade. His answers below were edited for length and clarity.
[AH] Do you expect private wealth to catch up with institutional wealth in terms of the percentage invested in alts?
[MS] Yes, I expect to see the retailization of alternative assets that will help private wealth get closer to institutional wealth’s allocation to alts. Technology innovation and regulatory changes have made this possible.
Both sides of the market — product manufacturers and investors — are ready for alts.
The supply side (asset managers and investment products) are ready to provide alts to individuals and wealth managers and now have the tools to reach this new group of investors in a systematic, efficient way that enables them to bundle up smaller investors. The prize? An $80 trillion AUM market of individual investor dollars.
The demand side (individuals and wealth managers) is looking to find ways to move away from the 60/40 portfolio and access alternative investments. A recent McKinsey study projects that retail allocation into alts has the potential to double from around 2% to 5% in the next three years.
KKR, a leading alternatives platform with $459 billion AUM, has said that they are earmarking 30% to 50% of newly raised capital to come from the retail channel. Blackstone, with $880 billion in AUM, now has roughly 25% of its AUM come from the retail channel.
Access platforms like iCapital, Allocate, Moonfare, CAIS and others are enabling individuals and wealth managers to invest into alts. And it’s a business-critical feature for wealth managers to offer alts to their clients, so I expect to see wealth managers meaningfully increase their allocations to alts.