UniFi by CAIA Crossing the Threshold - 7

Figure 1
Source: Bain 2023 Private Equity Report
Yet, the tools at the disposal of institutional and individual investors vary significantly. It
wasn't until the 2010s when the rise of democratized hedge funds, in the form of " liquid
alternatives " came into the mainstream after massive drawdowns in the global financial
crisis. Liquid alternatives, as a category, left many investors wanting more. Less flexibility,
leverage, and illiquidity, combined with mismatched expectations, resulted in many
investors realizing lower returns than they had anticipated from the funds.
Private markets have grown faster than hedge funds in terms of assets under management
but were slower to democratize in terms of vehicles and access points. But the second
wave of democratization has begun. This time around, improved technology, access points,
and thoughtfulness from some of the largest players in the asset management industry will
hopefully lead to better outcomes for investors.
CAIA Association will play an important role for years to come as this trend continues.
While an important first step, opening access to alternative investment products is not
enough to ensure better client outcomes. Look no further than the allocations in Figure 1.
Clearly, there is work to be done as allocations remain low despite the availability of the
product. CAIA is leading the way by guiding investors through the process, prioritizing
education over product, and keeping a fiduciary mindset that ensures all stakeholders put
the investor first.
No individual organization or professional body can forge ahead alone. This report draws
upon four senior thought leaders across the wealth and asset management industry to
cover several important tenants and techniques to thoughtfully integrate alternative
investments in wealth management portfolios.
Sandy Kaul, senior vice president and head of industry advisory services at Franklin
Templeton, explores many of these trends in Part 1: Building a New World: The
Democratization of Alternative Investments. She walks us through the past few decades
and the megatrends that have shaped the industry's desire to open access to alternative
sources of return, as well as the trends in place today that may continue or disrupt those
already established.
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UniFi by CAIA Crossing the Threshold

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