Morgan Stanley Wealth Management’s alternatives investment platform has seen a surge of inflows this year as clients and advisors seek alternatives to the traditional 60/40 portfolio, according to news reports.
During the second quarter of 2022, the platform attracted $21 billion in sales, 25% more than in the same quarter last year, FA-IQ sister publication FundFire writes, citing Morgan Stanley’s investment solutions group head Ben Huneke and a spokesperson.
By the end of June 2022, the platform had $152 billion in assets under management, representing a 30% year-over-year increase, according to the publication.
More than 40% of the 160 funds on the platform — which comprises hedge funds, funds of funds, real estate and real assets, private equity, private credit and exchange funds, among other alternatives — are either exclusive to Morgan Stanley or offered as “first-look” investments that would otherwise only be available to institutional investors, Huneke said, according to FundFire.
Funds from third-party managers include those from Alkeon Capital Management, BlackRock, Blackstone and Carlyle, the publication writes.
However, despite interest in mitigating risk in traditional portfolios amid market turmoil, rising interest rates and rampant inflation, advisors overall are allocating just 6.2% of clients’ assets to alternatives, according to Cerulli Associates, as cited by FundFire.
Moreover, advisors plan to raise that to only 7.1% by 2024, according to the publication.
At Morgan Stanley, meanwhile, advisors are only allocating 4% to alternatives, despite Morgan Stanley’s Global Investment Committee recommending a 10% to 20% allocation, depending on a client’s risk profile, FundFire writes.
But Huneke believes it can be far more.
“That 4% could be three times the size that it is today,” he said, according to the publication. “We're [in] the very early innings just to get to the allocations that most asset allocators would recommend for a wealthy individual.”