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By Opalesque:

Investors curb alternative investment allocations as risk awareness grows

An annual report (Trends in Alternative Investments) from Escalent's Cogent Syndicated division reveals a paradox in the alternative investments market: as retail investors become more knowledgeable about alternatives, they are actually pulling back on intended allocations. Average planned allocations among such investors have dropped from 26% to 19% since 2025, bringing them more in line with advisor recommendations of 14-16% for liquid alternatives.

Market volatility is a key driver, particularly among millennials - previously the most enthusiastic group - who are recalibrating their expectations as they better understand the risks involved. Access preferences are also shifting, with declines in platform- and advisor-based channels in favour of brokerage accounts.

Financial advisors, by contrast, are increasing their use of alternatives. The share of "heavy users" - those allocating 10%+ of AuM to alternatives - is projected to nearly double from 21% to 40% within two years, with average allocations rising from ~8% to ~11%.

A key barrier remains limited client knowledge; just 37% of affluent investors say they understand alternatives 'a little'. This positions advisors who invest in client education as the market's primary gatekeepers going forward. ......................

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