December 2022 - Invest In Self Storage

High-Net-Worth Investors Increasing Allocation to Alternative Investments

July 16, 2024December 29, 2022 by devteam

High-Net-Worth Investors Increasing Allocation to Alternative Investments Research has shown that high-net-worth investors (HNWIs) are increasing their allocation to alternative investments, such as private equity, hedge funds, and real estate. A desire for diversification and the potential for higher returns than traditional investments, such as stocks and bonds, drives this trend. High-net-worth investors are increasingly allocating a portion of their portfolio to alternative investments, according to a recently published research report, The Cerulli Report—U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2022: Shifts in Alternative Allocations. (https://www.cerulli.com/reports/us-high-net-worth-and-ultra-high-net-worth-markets-2022) The report, published by Cerulli Associates, a research, consulting, and analytics firm focused on the financial services industry, states that the average allocation of high-net-worth clientele’s assets to alternative investment options rose to 9.1% in 2021, up from 7.7% in 2020. The report cites a variety of reasons for the increase in alternative investments among high-net-worth investors, including portfolio diversification to help reduce volatility and new growth opportunities. Diversification is seen as a way to reduce portfolio volatility, and the new growth opportunities are seen as attractive to clients looking for ways to enhance their returns. As a result, financial advisors are increasingly adding alternative investments to client allocations for various reasons, with portfolio diversification and new growth opportunities being the top cited. Related: Non-Traded Alternatives Record High of $104 Billion Raised in 2022 “Advisors, disappointed in public equity and fixed-income returns, are allocating more to private capital exposures,” says Chayce Horton, research analyst. “By expanding opportunities into private asset and credit markets, affluent and high-net-worth investors are better equipped to diversify their portfolios properly.” Alternative investments include private equity, hedge funds, and real estate. These investments are generally considered riskier and more illiquid than traditional investments, such as stocks and bonds. Therefore, it is important for investors to carefully consider their risk tolerance and investment goals before allocating a significant portion of their portfolio to alternatives. According to the report, high-net-worth practices plan to increase their allocation to alternative investments in almost all strategies over the next two years. Private equity is at the forefront of this trend, with 50% of advisors and executives planning to increase their allocations, followed by private real estate at 45% and direct investments and co-investing at 32%. The majority of surveyed high-net-worth practices, more than 94%, expect to either maintain or increase their positions in all types of alternative investment opportunities, except for hedge funds. The trend of high-net-worth practices offering alternative manager search and selection as a primary service is on the rise, increasing from 50% in 2016 to 67% in 2022, and is expected to continue as private markets mature and more opportunities arise in the space. Cerulli believes that this trend will persist among high-net-worth practices.

Non-Traded Alternatives Record High of $104 Billion Raised in 2022

July 16, 2024December 29, 2022 by devteam

Non-Traded Alternatives Record High of $104 Billion Raised in 2022 Non-traded alternative investments, which include private equity, real estate, and infrastructure, have raised a record $104 billion in 2022, according to a Robert A. Stanger & Co. report. This marks a significant increase from the previous year and highlights investors’ growing interest in alternative investments. The increase in non-traded alternative investments was driven by non-traded real estate investment trusts, which raised $33 billion (a 3% decrease), non-traded business development companies, which raised $24 billion (a 67% increase), interval funds, which raised $24 billion (a 25% increase), and Delaware statutory trusts, which raised $9 billion (a 27% increase). “Strong total returns have driven overall fundraising during the past three years despite downward trends in the fourth quarter,” said Kevin T. Gannon, chairman of Stanger. Although non-traded REIT fundraising reached a low of $1.1 billion in November, the total fundraising for 2022 was $33.2 billion, slightly behind the highest-ever annual fundraising record set in 2021 of $34.4 billion. The most successful fundraisers during 2022 were Blackstone, which raised $31.8 billion primarily through its Blackstone REIT and Blackstone Private Credit Fund, Blue Owl Capital, which raised $10.8 billion in BDCs and private placements, Cliffwater, which raised $7.0 billion in interval funds, Starwood, which raised $5.4 billion in SREIT and Apollo, which raised $4.1 billion in NAV REITs, BDCs, and interval funds. “The industry successfully met redemptions up to the 5% quarterly cap with sufficient liquidity sleeves on the balance sheets to fund redemptions without tapping real estate asset sales in 2022. We expect to see the same in 2023,” said Gannon. Stanger’s survey of top sponsors tracks fundraising of all alternative investments offered to retail investors, including publicly registered non-traded REITs, non-traded business development companies, interval funds, non-traded preferred stock of traded REITs, Delaware statutory trusts, opportunity zone funds, and other private placement offerings. According to the survey, the top alternative investment sponsors of 2022 are: Blackstone ($31.8 billion). Blue Owl Capital ($10.8 billion). Cliffwater ($7.0 billion). Starwood ($5.4 billion). Apollo Global Management ($4.1 billion). Bluerock Capital Markets ($4.0 billion). HPS Investment Partners ($3.5 billion). Ares Management ($3.4 billion). FS Investments ($1.7 billion). Nuveen ($1.6 billion). The fundraising for non-traded REITs in 2022 reached $33.3 billion, a decrease compared to the $34.4 billion raised during the same period in 2021. Blackstone led the fundraising effort with $19.4 billion, followed by Starwood Capital with $5.4 billion. Other top fundraisers in the non-traded REIT space were Ares Real Estate Group ($1.6 billion), FS Investments ($1.6 billion), and Hines ($1.0 billion). Apollo Realty Income Solutions, which became effective mid-year, reported its first public fundraising data in December. PGIM Private Real Estate Fund (effective 8/15) has yet to report its fundraising numbers. Robert A. Stanger & Co. Inc. is a financial advisory firm founded in 1978 that specializes in providing a wide range of services to partnerships, real estate investment trusts, and real estate advisory and management companies, including investment banking, financial advice, fairness opinions, and asset and securities valuations. In addition, these services support strategic planning, capital formation, financings, mergers, acquisitions, reorganizations, and consolidations.