Advisors Foresee Alternatives to Outpace Public Investments
As the retirement plan industry contends with the Department of Labor’s (DOL) proposed rule on alternative investments in 401(k) plans, advisors expect the assets to outpace other investments in the years ahead.
A report by private markets investment management firm Adams Street Partners finds that 89% of advisors surveyed believe private markets will outperform public markets in the long term—down modestly from 92% last year. Another 70% expect a larger number of clients to show interest in private markets over the next three years. This was a 3% increase from 67% the year prior.
Advisors are already leading clients to alternative investments, with almost eight in 10 who say they’ve allocated at least 5% of client assets to alternatives. According to the findings, 95% say clients are satisfied with the performance of their private market investments.
Growing interest in the funds, along with broader access, is likely to lead additional adoption, the report states.
“Private markets are taking on a more prominent role in individual investor portfolios, bringing both opportunity and complexity for financial advisors,” said Michael Lucarelli, partner of Wealth Management at Adams Street Partners. “The question has shifted from whether to allocate to private markets to how to implement them effectively.”
Advisors cite the incoming wealth transfer, where expected inheritors will receive $90 trillion in assets over the next two decades, as a primary driver to private investment adoption. Others list the increased access to private markets, along with the growth of semi-liquid and evergreen investment vehicles, as key motivators. Forty-three percent of advisors list maximizing income as a top investment goal among clients for 2026, while 35% say their clients are prioritizing tax efficiency.
Further, 49% of advisors see semi-liquid or evergreen funds as the “most suitable structures” for clients, an increased from 44% a year ago, due to client access and ease of portfolio construction. Still, advisors acknowledge that trade-offs like liquidity constraints and potentially lower return expectations exist.
When asked about the most attractive themes for clients, technology and healthcare remained among the most lucrative (43%), followed by impact and/or environmental, social, and governance (ESG) strategies, and co-investments.
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.