As private equity gains traction in 401(k) plans and becomes accessible to retail investors, a new study analyzes the growth potential, and barriers, with alternative investments.
A survey by consulting firm Lansons Team Farner, and conducted by Opinium, found that 26% of Americans are planning to invest in alternative assets within the next few years or will strongly consider it. Almost half (48%) of respondents expressed interest in alternatives investments.
A greater number of respondents were more receptive to the assets once they understood what it is, Lansons’ team reported. According to the findings, respondents were four times more likely to say they had never heard of retail alternative asset platforms or didn’t know much about them (81%) than to say they had invested through such platforms or were familiar with them (19%).
“We found that simply explaining the concept of alternatives to those previously unfamiliar with them sparked immediate interest,” said James Schiavone, head of New York Operations at Lansons.
Despite this interest, respondents to the survey noted concerns with fraud, and 40% say they lacked the funds needed to invest in the assets. Others had trouble building trust and credibility with the assets, adding that they would like to see strong internal controls and corporate governance (48%), approval by government regulators (47%), and backing from reputable banks or brokerages (47%), before choosing to invest in the assets.
“Our research underscores the importance of earning investor trust by clearly communicating the safeguards and compliance measures in place to protect them,” added Schiavone.
The research comes as private equity sees significant support from industry leaders and regulators. On Monday, Securities and Exchange Commission (SEC) Chairman Paul Atkins disclosed that he had started directing his staff to examine expanding private markets access for retail investors.
BlackRock CEO Larry Fink and T. Rowe Price Chairman Rob Sharps have also called for expanding alternative investments, including incorporating private equity to 401(k) plans.
While alternative assets have historically been used as a tool to grow investments, its usage has generally been limited to institutional investments and high-net-worth clients in the past. Now, as accessibility grows, these assets have a $1.3 trillion dollar growth potential among retail investors, Lansons reports.
Additional findings from Lansons research can be found here.
SEE ALSO:
Private Equity in 401(k)s ‘Will Happen’ says T. Rowe Price’s Rob Sharps
SEC Embracing Wider Investor Access to Private Markets
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.