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Good morning and happy Friday.
Remember when AI stood for alternative investments? Neither do we.
Welcome to a special edition of Advisor Upside, where we dive into the weird, wonderful, and increasingly unavoidable world of alternative investments. Once reserved for billionaires and endowments, alts are quickly becoming a much larger part of the wealth management playbook. Whether you’re already allocating, or break into a cold sweat every time a client mentions SpaceX (or one of the soon-to-IPO giants in the better-known type of AI), we’re here to separate the signal from the sales pitch.
We’ll cover the biggest trends, regulatory shifts, new products and advisor strategies reshaping private markets. Think of us as The Cure for your alts-induced angst. Today, we’re talking about their use in 401(k) plans, the great wealth transfer, and more.
Let’s get alternative. |
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The biggest wealth transfer in history may also become one of the biggest boons for alternative assets.
With roughly $124 trillion moving from older to younger generations over the next two decades, many wealthy heirs aren’t following their parents’ investing playbook. Instead, they plan to direct a significant portion of those assets into alternatives, including cryptocurrency, private equity, commodities and even collectibles. Some 88% of Gen Z and millennial investors expect to increase their allocations to alternatives in the coming years, with most believing traditional assets alone are unlikely to generate outsized returns, according to a
Bank of America report. “Younger investors don’t just have different preferences,” said Mike Pelzar, head of investments at Bank of America Private Bank. “They have a fundamentally different portfolio philosophy.”
The shift is also elevating the role of advisors. A key concern for many wealthy clients is whether their children will be prepared to manage inherited assets responsibly and preserve family wealth. Only about one-third of ultra-high-net-worth clients said their children are very prepared to receive an inheritance, according to the report. Roughly 80% involve their wealth managers in estate-planning discussions with the next generation. “[It] creates a structured forum for these generational conversations to happen proactively rather than reactively,” Pelzar said.
A Little Variety
Younger investors already allocate about 15% of their portfolios to alternatives on average. While enthusiasm for the asset class has outpaced actual adoption so far, Pelzar expects that to change as more wealth changes hands. “As younger, alternatives-oriented investors assume control of more assets, it is reasonable to expect that alternatives will represent a meaningfully larger share of wealth portfolios over time,” he told Advisor Upside. Although barriers such as complexity and high investment minimums remain, Pelzar said they are becoming easier to overcome with the right education and advisory support.
The report also found:
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Cryptocurrency ranks as the top wealth-creation opportunity among Gen Z and millennial investors, with 58% already owning digital assets. Gen X, meanwhile, is the fastest-growing generation of crypto investors.
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Older investors tend to view alternatives primarily as diversification tools, while younger investors are often drawn to the asset class out of genuine interest and conviction.
“This distinction should shape how advisors frame these client conversations,” Pelzar said. “Advisors who engage on these topics proactively are more likely to help clients make informed, well-structured decisions.”
Written by Griffin Kelly |
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Photo via JP Morgan Asset Management |
Investors are looking beyond traditional markets, and in alternatives, the best opportunities aren’t visible to everyone. That’s why access matters.
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Learn more.
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Even some celebrities don’t get this much fan mail.
In March, the Department of Labor
proposed regulations that would expand access to alternative investments — private assets, real estate and the like — for millions of retirement account owners across the country. The agency solicited comments from the public, raking in
more than 40,000 letters both supporting and opposing the measure. But when will alts actually make their way into 401(k)s? It could be as soon as this fall, experts said, once the DOL can review all those comments.
“With today’s advent of AI, it’ll be even easier for [the Labor Department] to look through the great big pile of 40,000 letters and figure out, ‘OK, what are the common trends or common themes that are being released here?’” said Mike Dullaghan, director of retirement sales execution for Franklin Templeton. “What they’ve done many, many times — and I would maybe expect it here — would be that they’ll release, after they digest those letters, an FAQ. And that’s really been a helpful part of the understanding process.”
Million DOLlar Baby
Defined contribution plans have been utilizing private markets and private real estate for decades, but the DOL’s proposed rule is bringing new attention to the area. It’s also going to bring private assets to smaller, less sophisticated plans. “We’ve typically seen private assets in the above-billion-dollar plans, and that’s a small percentage of the total number of defined contribution plans in the industry,” Dullaghan said. Private assets shouldn’t serve as standalone investments on any type of 401(k) menu, he added, but instead as part of a target date fund or professionally managed portfolio. “That’s the place where you truly have the potential to … bring it down into the land of million-dollar plans, instead of billion-dollar plans.”
What’s also important to consider is that “industry participants” (such as record keepers, advisors, consultants and asset managers) tend to agree that adding alts to defined contribution plans is an essential element of a broader asset allocation program, said Tripp Braillard, head of defined contribution distribution at Clarion Partners. The opposition mainly
stems from some advisors, advocacy groups, industry watchdogs and Democratic lawmakers.
Hold the Risk, Please. Those who oppose alts in 401(k)s often cite their propensity for increased risk. But that doesn’t have to be the case, Braillard said, particularly for assets like real estate that have been used by large pools of institutional capital for decades.
“Most large defined-benefit plans in the US or pools of retirement capital, sovereign wealth funds, endowments and foundations, etc., all use private markets and private real estate today,” he added. “Most investors who aren’t used to private markets, they just automatically think, ‘Man, that sounds way more risky than what I’m doing.’ I think the more folks get into it and look under the hood, the more they learn that private markets are a really good addition to a well-diversified asset allocation program.”
Written by Lilly Riddle |
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Some advisors are giving private credit the old switcheroo.
While it remains one of the most widely used alternative asset strategies among advisors, momentum has slowed significantly. Some six in 10 of the more than 500 advisors recently
surveyed by ISS Market Intelligence said they currently have exposure to private credit. But just 23% expect to increase allocations over the next year, far fewer than the 64% who said the same at the end of 2024.
The hesitancy may not come as a shock as headline after headline about high-profile bankruptcies and concerns around AI disruption of software companies, which make up a significant portion of private credit debt, are fanning fears. Several firms, including
Apollo and
Cliffwater, have recently capped redemptions from their private credit funds at 5% of outstanding shares as investors look for the exit.
“Many investors are throwing the baby out with the bathwater,” said Scott Bishop, a financial planner with Presidio Wealth Partners. “When fear rises, markets often stop distinguishing between strong assets and weak assets, and between strong managers and weak managers. That’s typically when experienced credit investors find some of their best opportunities.”
Risk and Reward
Liquidity is a chief concern when it comes to private credit, per the survey data, and with good reason. Investors may be able to snag higher yields than they’d get in the public debt market, but the tradeoff is locking up their cash for years. That’s why it’s important to consider the risks:
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Private credit shouldn’t replace an investor’s entire bond allocation, but complement it, said Justin Rice, a financial planner with Integrous Wealth Strategies. “The role of public bonds is often liquidity, stability and portfolio ballast,” he added. “The role of private credit is income generation and potentially capturing an illiquidity premium.”
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Investors should also question whether a product comes with a manager with the underwriting expertise and discipline to separate opportunity from risk, Bishop said. “In private markets, manager selection matters more than asset-class labels.”
Investor Error. “The mistake I see is when investors focus only on the yield and ignore what they’re giving up in exchange for it,” Rice said. In fact, the pullback in private credit may be healthy. When money is flooding into an asset class, investors sometimes stop asking hard questions; a more disciplined environment tends to reward managers with strong underwriting and risk controls rather than simply the highest advertised yield, Rice said. “Private credit isn’t magic.”
Written by Mallika Mitra |
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Knowledge Is Power. The “democratization of alternatives” process playing out in the wealth management space in recent years is deepening, with more advisors shifting from
education to implementation
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Ayy, Sit on It.
Taylor Swift’s folding chair from Game 3 of the Eastern Conference Finals is being removed from Cleveland’s Rocket Arena and put up for auction for more than $6,000.
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Explore Alternative Investments: Our Access Becomes Yours. In Case You Missed It. Explore the Guide to Alternatives for a clear outlook on private equity, real estate, infrastructure, private credit, transportation, hedge funds and beyond — so you can simplify the complex and support smarter client decisions.
Read now.*
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Disclaimer
*Based on market capitalization, Forbes Global 2000; 6/24/26.
J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.
Investing involves risk, including possible loss of principal.
© JPMorgan Chase & Co., 2026. |
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