Despite persistent skepticism about their risks and costs, private markets continue to exert a strong pull on assets managed by financial planners.And registered investment advisors, who are under a fiduciary obligation to always put their clients first, are among the most eager to help investors find a way into the sometimes treacherous world of private equity, private credit and other alternative investments. Tim Thomas, the chief investment officer at Seattle-based RIA Badgley Phelps Wealth Managers, said he won’t even consider private markets for clients unless they have more than enough money to pay for everyday expenses, emergencies and other contingencies. For those with sufficient liquidity, he’ll often recommend they dedicate as much as 15% of their portfolios to alternatives.”And some clients may want more,” Thomas said. “We do see others allocating up to 30% or maybe even a little bit higher. But I’d say for us, as a base, and without having all kinds of client details incorporated, we’ll be looking at 10% to 15%.”READ MORE:Forget the returns. Advisors look to private markets for diversificationClients want in on private markets. Should advisors hold their hands?All about alts: The cases for (and against) private investmentsWall Street wizards seek to decode private-market returnsTop regulators cite valuation risks in private creditThomas is far from alone in seeing benefits to putting clients into alternatives to stocks and bonds. A recent poll of roughly 160 financial advisors by the asset management giant Blackstone found that nearly 80% of the respondents plan to increase their allocations toward private markets this year. And the investment bank Robert A. Stanger reported last month that $122 billion was raised in 2024 for alternatives, topping the previous high of $105 billion set in 2022.Private investments’ appeal outpaced that of any other type of investments advisors were asked about in Blackstone’s survey, which was conducted from October to December. Only 7% of the respondents said they wanted to increase their allocations to stocks, while an equal percentage said the same about bonds and other fixed-income investments.The results also aligned with what Thomas and many others see as one of the primary benefits of private markets: Their ability to offer diversification. Just over half — 55% — of the respondents to Blackstone’s survey said their top priority for this year is diversifying portfolios. That exceeded other goals such as preserving capital (the priority for 18% of the survey takers), generating income (11%) and securing higher returns (13%).Thomas, whose firm works primarily with wealthy clients, said general awareness of private markets has certainly grown in recent years.”We have had a number of clients come to us and ask for these offerings, whether it’s private equity, real estate, private credit, what have you,” he said. “It is something that is on clients’ minds and something that they are asking for. An
Mar. Feb 11th, 2025
