bfinance reports shift in use of alternative investments

More than two thirds (69%) of wealth managers have added new asset classes for their clients within the last three years, while 52% have stated they will do in the next two years, according to a new study from bfinance.

The investment consultancy firm suggested that wealth managers are expanding the range of investment strategies available to clients, particularly within alternative asset classes.

bfinance’s Wealth Manager Investment Survey gathered data from 120 wealth managers in 29 countries across five continents. It found that six in 10 (60%) wealth managers now provide exposure to private equity, while 52% use emerging market debt, 52% use private credit, 48% use infrastructure and a further 42% provide access to hedge funds.

When looking at allocations, the research also showed that the majority of wealth managers have reduced the proportion of wealth client assets invested in fixed income (63%), while 66% have also increased allocations to equities and 61% have increased allocations to private markets strategies.

bfinance suggested this shift towards alternatives is set to continue “strongly” over the next two years, with improving sentiment towards liquid alternatives such as hedge funds, although only a minority plan to increase equity exposure.

Furthermore, four in five (80%) wealth managers also now integrate ESG considerations as part of their offering, the research revealed, which is up from 37% three years ago. Half of wealth managers are also integrating impact considerations, a figure up from 18% three years ago, while a third (33%) of respondents stated they are actively considering doing so.

bfinance senior director, Kathryn Saklatvala, commented: “It’s fantastic to see the breadth of investment capability that many wealth managers are now able to offer to clients – the results of this survey show a significantly higher usage of strategies such as private equity, infrastructure, private credit and hedge funds than we’ve seen in other studies, and far more widespread integration of ESG factors into investment.

“These capabilities have clearly evolved a great deal in recent years, supported by the development of in-house teams and the growing use of external asset managers. Wealth managers are under real pressure to create high-value, differentiated product offerings as well as find new scale-driven efficiencies that can support profitability – the market is increasingly competitive, and this report highlights significant downward movement in fees.”

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