iCapital has emerged as the industry’s largest alternative funds platform. It has cut distribution deals and received financial backing from firms such as BlackRock, Blackstone, BofA Merrill, Morgan Stanley, Singapore’s Temasek and most Wall Street brokerages. As of June 30, the platform serviced more than $80 billion in client assets across 750 funds.

iCapital also is offering retail investors access to institutional funds, most recently giant Bridgewater. Private equity firms and brokerages have partnered with iCapital to funnel smaller investments into “feeder funds” that are then deployed into institutional alternatives-focused funds.

Matt Brown, founder and chairman of CAIS group, says, “We’re clearly at an inflection point in terms of advisor adoption,” adding that “there’s a lot of product innovation underway because of what’s happening on the demand side.” His firm operates an alternative investment marketplace that provides an array of alternatives education modules coupled with a growing roster of alternative investment solutions that are far more accessible than the insular world of traditional hedge fund managers that serve institutional clients.

Brown adds that his firm’s ecosystem makes it relatively easy to learn about and then transact alternative investments. “CAIS streamlines the end-to-end transaction process, making investing in alternatives simple,” he says.

Demand for alternatives has been rising as stock markets have become more expensive and interest rates threaten to move up from historic levels. Ken Heinz, president of HFR, notes that the hedge fund industry’s asset base has swelled from $3 trillion to $4 trillion in just the past 18 months.

Broaden the scope to include all alternative assets owned by all stripes of investors, (which hedge funds are a part of), and the figures grow far larger. Research firm Preqin predicts assets under management in alts could grow from $10.7 trillion last year to $17 trillion by 2025.

For advisors who have just begun to learn about all of the various alternative approaches, a quick primer may be helpful. Key categories include: private equity, private debt, real estate, infrastructure, relative value arbitrage, event-driven or activist investing, hedged equity and global macro.

Some of these approaches provide exposure to assets that are non-correlated with stocks and bonds, helping to tamp down volatility. Other approaches aim to deliver superior returns to their public market counterparts. “There are a range of opportunities, from high beta to neutral beta or even negative beta,” says HFR’s Heinz. Certain categories such as activist investing, distressed assets and special situations are the kinds of approaches that were most easily accessed by institutional investors but are becoming more readily accessible to advisors these days.

The Hamilton Lane Private Assets Fund (PAF), available to U.S.-based investors, is just one of the many funds that can now be bought on a platform such as iCapital. The firm’s platform, which includes PAF as well as its Global Private Assets Fund (GPA, available to non-U.S. investors) was launched in 2019 and has already attracted more than $1.6 billion in assets. Since its launch, PAF has garnered a 21.07% annualized return, with a blend of private market investments including direct equity (33%), direct credit (18%) and secondaries (49%).

That impressive gain shouldn’t be compared to funds that are strictly focused on public equities. The blend of assets, including private credit, is what makes that performance so impressive. Stephen Brennan, head of private wealth solutions at Hamilton Lane, says that “private equity and private credit have outperformed their public counterparts in 19 of the past 20 years.” His firm has historically focused on institutional clients and only recently opened up its focus to a broader set of investors—including financial advisors.

Still, he cautions that the PAF fund and other private-market focused funds shouldn’t be seen as short-term trading vehicles. “The holding periods for private market investments are longer, and it’s important to have consistent exposure to be positioned to capture the long-term benefits,” says Brennan.