Alternative investments are reshaping wealth management: From institutional dominance to mainstream adoption – driven by innovation, access, and strategic evolution

For decades, alternative investments (alternatives) – private equity, hedge funds, private credit, infrastructure, real estate, and even newer entrants like digital assets – were the domain of institutions. Pension funds, endowments, and sovereign wealth funds built deep allocations, attracted by diversification, higher yields, and strategies less correlated with traditional equity and bond markets.

But 2025 marks a turning point. Alternatives are now entering the mainstream of private wealth portfolios, reshaping how high-net-worth individuals (HNWIs) and their advisors approach portfolio construction.

The numbers are striking. Bain estimates that alternative assets under management (AUM) for private wealth investors will triple from $4 trillion today to $12 trillion by 2034, while Everest Group forecasts AUM for alternatives to hit $30 trillion globally by 2030. This isn’t just a wave – it’s a tidal shift.

The rise of alternatives is showcased by just how many notable banks have expanded their offerings this year:

  • Merrill and Bank of America Private Bank have launched the Alts Expanded Access Program, a new private market program for ultra-high-net-worth (UHNW) clients with a net worth of $50 million or more.
  • Goldman Sachs and T. Rowe Price have announced a strategic collaboration, focused on providing a range of wealth and retirement offerings that incorporate access to private markets for individuals, financial advisors, plan sponsors, and participants.
  • Bank of Singapore has collaborated with leading global fintech iCapital to launch an alternative investment digital platform – FIM Alternatives Select – dedicated to the bank’s financial intermediary partners.

From institutional playbook to private wealth reality

Historically, institutions and family offices led the way in alternatives, building allocations of over 20%. HNWIs, by contrast, lagged far behind, often allocating less than 3% of portfolios.

That scenario is shifting: more wealth managers are advising allocations of over 20%, with firms like Bank of America suggesting that 25% in alternatives may be optimal for HNWI portfolios. Family offices have long set the example, with allocations closer to 30–50%.

So, what’s fueling the change?

  • Public market fatigue: Volatile, low-yield public markets are prompting a shift toward more stable, diversified alternatives.
  • Product democratization: Innovations in fund structures and lower entry barriers are making alternative investments accessible.
  • New access channels: Digital platforms and tokenization are simplifying engagement with private markets and previously illiquid assets.
  • Global reach: Alternatives now offer international exposure, enabling geographic diversification and access to emerging growth.

A survey by BNY Pershing shows how wealth managers are navigating this shift:

  • Widespread adoption: 94% already allocate to alternatives, while 44% allocate more than one-fifth of portfolios.
  • Popular asset classes: REITs (89%), private equity (67%), and hedge funds (67%) top the list.
  • Liquidity matters: 58% cite liquidity as a top factor when selecting alternatives, alongside strategy and tax considerations.
  • Simple > complex: Wealth managers want straightforward strategies they can explain.
  • Brand trust: Large, established managers dominate flows.

The operational challenge: From back office to boardroom priority

If private wealth is the new growth engine for alternatives, operations is the critical bottleneck. Unlike liquid public securities, alternatives involve capital calls, irregular cashflows, bespoke net asset values (NAVs), and illiquidity management. Investor reporting is more demanding, regulatory filings more fragmented, and valuation practices less standardized.

That’s why operations are no longer a “back-office utility” when it comes to adopting alternatives – they’ve become a strategic lever for competitiveness and growth. Firms are re-architecting their models around technology, talent, and partnerships. This operational reinvention is crucial to delivering the investor experience HNW clients expect – real-time data, personalized reporting, and seamless onboarding.

Despite the momentum, there are several hurdles to overcome before alternatives become a truly mainstream staple of wealth management:

  1. Education and suitability: Many investors and advisors still lack the knowledge to assess whether alternatives align with individual risk profiles and goals.
  2. Complexity in execution: Structuring, onboarding, and managing alternative investments often involve intricate processes.
  3. Manager selection: Identifying top-performing, trustworthy managers in opaque private markets remains a critical challenge.
  4. Liquidity management: Alternatives typically involve long lock-in periods, requiring careful planning to avoid cashflow mismatches.
  5. Regulatory shifts: Evolving global regulations can introduce uncertainty and compliance challenges for both providers and investors.

The rise of alternatives isn’t just another investment trend. It’s reshaping the structure of wealth management. The winners will invest in talent, leverage technology, curate partnerships, and prioritize transparency.

Looking ahead: Alternatives as core, not complement

Traditional portfolio models are evolving. Alternatives aren’t just diversifiers – they’re becoming core components of long-term wealth strategies.

For HNW and family office investors, the question is no longer, “Should I invest in alternatives?” but, “How should I allocate, and who with?”

For wealth managers and private banks, the challenge is operational, educational, and strategic. But the prize is enormous: tapping into trillions of dollars seeking differentiated returns in an uncertain world.

The alternatives renaissance is here – and it’s only just beginning