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Consultants Fluent In Alternatives In Pole Position To Gain Share Amongst Institutional Investors

The ongoing shift to more opaque alternative asset classes, an area of limited in-house expertise for many institutions, may boost the business development efforts of institutional consultants, according to research firm Cerulli Associates.

The investing challenges created by the persistence of ultra-low interest rates and heightened equity valuations have caused institutional investors to seek higher allocations to alternative investments and private markets. This trend is challenging consultants to build or acquire the subject-matter expertise needed to evaluate new asset classes and make informed recommendations to clients. A shifting focus toward more esoteric and opaque asset classes provides an opportunity for consultants, as private equity and debt, infrastructure, and real estate are beyond the comfort zone of many asset owners.

“This lack of familiarity increases the likelihood that asset owners will seek assistance in adding allocations in any of these areas,” says Robert Nelson, associate director at Cerulli. “While there is a cost to build first-rate expertise and networks in alternative asset classes and private markets, consultants that demonstrate deep knowledge of the space and offer valuable guidance to clients will be optimally positioned to defend and gain share among institutional investors,” he adds.

Across institutional channels, there is no better growth opportunity than that which exists among endowments and foundations, according to recent Cerulli research indicating that 47% of consultants see great potential for new growth within this channel. Like so many other institutional channels, they are increasingly focused on private investments and alternative asset classes. “Investment consultants are uniquely positioned to identify best-in-class private investment opportunities that clients are pursuing for return-seeking purposes,” according to Nelson. “Additionally, investment consultants can highlight to endowments and foundations the advantage of having more time to focus on spending policy rather than investment policy,” he adds.

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