There is a “new alts generation”, according to Goldman Sachs Asset Management, with millennials showing greater interest and allocation to alternatives.
A survey of high-net-worth individuals, commissioned by the asset manager, found that respondents born between 1981 and 1996 allocate 20 per cent of their portfolios to alternatives, compared with 11 per cent for Gen X – those born between the mid-1960s and early 1908s – and just six per cent for baby boomers, who were born between 1946 and 1964.
Conversely, millennials view public equities as riskier compared to how older generations view stocks. They estimate approximately 27 per cent of their assets to consist of public equities, substantially lower than the estimated 43 per cent average across all generations.
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Enhancing returns is the primary motivation for allocating to alternatives. Millennials are less concerned about diversification when considering investing in alternatives (27 per cent), compared to 48 per cent of Gen X and 53 per cent of baby boomers who prioritise diversification to help meet their goals of retirement planning, maintaining lifestyles and preserving wealth.
Millennials are more interested in innovation and accessing unique opportunities, looking to alternative assets to grow their wealth.
Goldman Sachs suggests that this generational divergence in motivation towards alternative allocations has implications for how financial advisers engage with clients and how alternative investment products are explained across different age groups.
The survey polled 1,000 US high-net-worth investors, with at least $1m (£748,000) of investable assets, and ultra-high-net-worth investors, which at least $30m of investable assets.
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Of the investors surveyed, 80 per cent used at least one financial adviser, but not necessarily for alternatives. Just 41 per cent of advised investors have discussed private markets with an adviser, compared to 60 per cent who have discussed ETFs and 69 per cent who have consulted them about tax strategies.
Millennials cite social media as a source of information on alternatives, while baby boomers rely on traditional financial media to access information on the asset class.
Wealthier individuals look to alts
The report also found that alternatives adoption rises with wealth. 80 per cent of households with $10m or more in investable assets allocate to alternatives, compared to 39 per cent of those with $1-5m.
“As wealth accumulates, so too does the imperative to diversify beyond traditional markets and explore dynamic asset allocation models,” said Kyle Kniffen, global head of alternatives for third party wealth at Goldman Sachs Asset Management.
“This approach leverages alternative investments to seek enhanced returns and capital preservation, moving beyond conventional portfolios to optimise long-term financial health.”
