hedge funds, commonly referred to as Liquid Alts, are emerging as an important segment in the wealth management sector. Their unique structure and investment strategy set them besides traditional investment vehicles.
As High Net Worth Individuals (HNWI) seek diversified portfolios, Liquid Alts give you a compelling solution, balancing potential returns with risk mitigation. However, while they have enormous potential, there are challenges to overcome, and platforms like FundKernel have reached the forefront of addressing these hurdles.
Understanding Liquid Alternatives
Liquid Alternatives are open-end fund products that purchase assets underlying or employing alternative investment strategies. While they share similarities with mutual funds inside their operation, their target market has a definite difference.
Liquid Alts are primarily made for professional investors, setting them apart from the more common retail-oriented mutual funds. For astute asset allocators, Liquid Alts serve as a potent tool to reach returns that hedge against the vulnerabilities of a normal 60/40 portfolio.
The Untapped Potential of Liquid Alts
Recent data from PWC sheds light on an interesting disparity. While institutional investors allocate between 27%-29% of these portfolios to alternatives, individual wealth portfolios lag behind with less than 5% allocations. However, the tide appears to be turning. As High Net Worth Individuals (HNWI) be much more discerning and informed, there's a growing inclination towards alternatives.
PWC's projections indicate that Asia's Assets Under Management (AUM) in alternatives are set to outpace growth in other regions.
Considering the current 19% wealth penetration in Asia, this equals
an estimated incremental revenue opportunity including $90 Billion to
$47 Billion.
Challenges in Harnessing Liquid Alts
Whilst the potential is undeniable, tapping into this goldmine isn't without its challenges. Wealth managers keen on offering Liquid Alts need robust tools and support for sourcing, research, selection, and execution. The issue is there's a palpable dearth of those resources, particularly for External Asset Managers, Family Offices, and Independent Financial Advisors.
Asset managers also grapple with the intricacies of connecting with the proper distribution partners. Asia's diverse regulatory environment and varied investment appetites further complicate things.
Additionally, frontline wealth advisors, often new to the nuances of alternatives, might hesitate to recommend these items, erroneously perceiving them as too risky, complex, or not cost-effective.
Bridging the Divide with Fundkernel
That is where FundKernel steps in. Established with a vision to handle these challenges, FundKernel supplies a comprehensive technology platform built with a suite of digital tools to empower wealth managers with the infrastructure they should efficiently source, research, advise, and execute top-tier Liquid Alts.
Wealth managers can seamlessly access and subscribe to an entire suite of Liquid Alts products using our open architecture model. This eliminates the necessity for direct interactions with individual fund managers and even presents opportunities for revenue through rebates.
For asset managers, FundKernel's robust distribution network is really a game-changer. It gives them with an electronic conduit to directly engage making use of their audience, ensuring that their firm and items are showcased to the best clientele, enhancing their promotional efficacy.
While Liquid Alts represent a promising frontier in wealth management, realizing their full potential takes a synergistic approach. With platforms like FundKernel leading the charge, the future of Liquid Alts in wealth management looks brighter than ever.