Private Wealth's Trillion-Dollar Alternative Assets Shift

In Brief:

Ted Seides interviews Michael Sidgmore, co-founder of Broadhaven Ventures and creator of the Alt Goes Mainstream podcast, about the massive shift of private wealth into alternative investments. Sidgmore, whose career spans Goldman Sachs, iCapital, and fintech ventures, explains how individual investors are following institutions into alternatives but at an accelerated pace. While institutions typically allocate 20-50% to alternatives, private wealth portfolios average just 2-5% - but that gap is closing rapidly. With every 1% shift in allocation representing approximately $500 billion, this convergence will reshape asset management for decades.

Big Picture Drivers:

• Convergence: Institutional and private wealth investing approaches are merging

• Democratization: New structures enable individual access to alternative investments

• Consolidation: Asset managers must become either very large or highly specialized

• Education: Wealth advisors and clients need significant education on alternatives

Key Topics Covered:

• Market Structure: Private wealth now exceeds institutional capital in alternatives flows

• Distribution Models: How different size managers approach the wealth channel

• LP Evolution: Wire houses, private banks, RIAs developing institutional-like processes

• Product Innovation: Evergreen structures providing greater liquidity options

Key Insights:

• Asset Manager Evolution: Firms must choose between scale, specialization, or consolidation

• Resource Requirements: Serving wealth channels requires hundreds of dedicated team members

• Brand Importance: Recognition and trust drive wealth flows more than in institutional space

• Market Impact: Increased capital flows may compress returns, particularly in upper markets

• Content Strategy: Marketing and education becoming as important as distribution capabilities

• Ecosystem Development: Technology platforms enabling smaller managers to access wealth channel

• Strategic Partnerships: Traditional asset managers acquiring alternatives specialists to expand capabilities

By The Numbers:

• $110 billion: Amount committed to alternatives by six largest wirehouse platforms last year

• 1-3%: Current average allocation to alternatives in private wealth portfolios

• $500 billion: New investment flow represented by each 1% allocation shift

• $12 billion vs $1.7 billion: Average 2024 capital raised by top six firms vs firms ranked 7-25

• 200: Number of evergreen funds in the US market compared to thousands of closed-end funds

Memorable Quotes:

• "The firms that are going public have to think about their brand differently... it's a whole set of things that are all tied together." - Michael Sidgmore, explaining how alternatives firms are evolving from funds into businesses

• "Is this alpha in search of beta? I say that a little bit tongue in cheek, but I think this does go back to... are people still generating returns in excess of what they'd get in public markets?" - Michael Sidgmore, questioning if private market returns will justify illiquidity as more capital flows in

• "When we asked 418 ultra-high-net-worth individuals to name three firms that come to mind for alternative assets, the first answer was 'I don't know.' The next three were Schwab, Fidelity, and BlackRock – which in 2022 weren't even doing private markets." - Michael Sidgmore, highlighting the crucial importance of brand in the wealth channel

• "The large multi-strategy platforms will be able to raise capital, particularly from the wealth channel, because of sheer size and scale. So the smaller firms really have to ask themselves the question, do they want to be in this business?" - Michael Sidgmore on the strategic choices facing mid-sized alternatives managers

• "I think marketing is as important as distribution and sales. You need the aerial support from marketing and the constant barrage of information and communication with investors. That can enable smaller firms to punch above their weight." - Michael Sidgmore on how content strategy is becoming a competitive advantage

The Wrap: 

The influx of private wealth into alternatives represents a structural shift that will transform both investment management and wealth advisory businesses. Asset managers face strategic choices about scale, specialization, and distribution, while advisors must evolve institutional-like processes. This democratization brings both opportunity and challenges, as returns may compress while access expands. Content, education, and brand will be critical competitive advantages in this new landscape.