MMI is pleased to present the eleventh edition of its annual research report on the Retail Distribution of Alternative Investments. Produced in conjunction with FUSE Research Network, the report analyzes proprietary data provided by MMI member firms on both traditional and liquid alternative investments.
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On the heels of unprecedented pandemic-induced volatility in 2020, a new set of challenges emerged in 2021, including peak equity valuations, higher interest rates, and a new inflation regime. With traditional long-only assets vulnerable, investors shifted asset exposures and once again leveraged liquid alternatives to help dampen volatility and generate uncorrelated sources of return. As a result, liquid alternatives grew to a new peak of $580 billion in 2021, as market returns and organic growth drove the group’s assets under management.
Key findings include:
- Once again, 2021 was a very solid year for hedge fund returns as the group returned 10.2%, according to Hedge Fund Research. Based on LCH Investments data, the 20 best-performing hedge funds collectively gathered a record $65.4 billion in 2021.
- Hedge fund assets under management hit an all-time high at the end of 2021, reaching $4 trillion. Meanwhile, fees on those assets continue their secular decline.
- Private equity fundraising outdid itself again in 2021, raising a record $733 billion, which represents a 37% increase from 2020’s total of $535 billion.
- Traditional alternative assets under management at wirehouse firms totaled $270 billion in 2021, representing a 35% increase from $200 billion in 2020.
- Assets in liquid alternatives increased 3% year-over-year, ending 2021 at $580 billion as market gains and net inflows of $70 billion contributed to the category’s growth. Mutual funds and ETFs netted $51 billion and $19 billion in net flows, respectively.
- Net new product development within the liquid alternatives space finally turned positive again in 2021, with openings outpacing closures by nearly a 2 to 1 ratio. The nascent digital asset category led launches with 28 new product offerings.
For the second consecutive year, the report includes a section focusing on financial advisors' perspectives on alternatives based on a joint FUSE Research Network/WealthManagement.com survey. Despite obstacles such as the lack of liquidity, our research shows that the reasons for incorporating alternatives in portfolios remain compelling enough that financial advisors expect their use to continue growing across the major alternative categories.
If you have questions about the report, please contact:
Pat Newcomb, FUSE Research Network, (781) 400-5169, pnewcomb@fuse-research.com
Joan Lensing, Money Management Institute, (646) 868-8518, jlensing@mminst.org
