The third annual CAIS alternative investment survey, conducted in partnership with Mercer, underscores a pivotal shift in how financial advisors allocate to alternatives. The findings reveal a movement towards a new kind of modern portfolio construction, with alternatives on their way to command a more substantial share of overall portfolios.
With the advancement of technology, many advisors no longer question the merit of alternatives in client portfolios. Rather, they now focus on implementing alts, aiming to improve portfolio diversification and outcomes—and growing their business.
According to the 2025 CAIS-Mercer report, The State of Alternative Investments in Wealth Management, a remarkable 92% of surveyed advisors allocate to alternatives, and 91% plan to increase their allocations in the coming years. This signals a widespread recognition of alternatives as a key element in portfolio construction.
Advisors have been adopting alts more meaningfully amidst the wealth transfer from baby boomers to their offspring, who tend to be more comfortable investing in alternatives.1 Simultaneously, limitations of the traditional 60/40 allocation model in today’s market environment further underscore why some financial advisors are adopting alternatives.
In this piece, I invite you to explore key trends and insights shaping wealth management with alternative investments, as revealed by the latest CAIS-Mercer survey.
Evolving Allocations to Alternatives and Structured Investments
Private debt leads in popularity, with 89% of surveyed advisors allocating to the asset class, followed by private equity (86%), real estate (85%), hedge funds (54%), infrastructure (51%) and structured notes (49%). Structured notes are gaining traction, with 38% of advisors planning increased allocations. In the previous CAIS-Mercer survey, 27% of advisors responded that they planned to increase structured notes allocations in the next year.
Technology Applied to Investment Portfolio Construction
Advisors are increasingly relying on technology over traditional resources to build portfolios. More than half (54%) say they use portfolio construction tools, and 47% are integrating model portfolios into their practices. With these tools, advisors aim to harness other sources of information when making allocation decisions across their practices. Advisors with books of business up to $5 million are more likely to use or consider model portfolios for alternative asset allocations, while those managing $20 million to $50 million often employ multiple allocation methods. Closer to the upper end of the spectrum, where advisors may manage more than $100 million in client assets, advisors are nearly as inclined as those with smaller books to use model portfolios.
The Rise of Registered Alts Funds
Based on survey data, registered funds have emerged as a game changer for alternatives’ adoption due to their accessibility, lower minimums, and liquidity features. These funds, registered with the US Securities and Exchange Commission under the Investment Company Act of 1940, must comply with regulatory requirements designed to protect investors and provide transparency. Two-thirds of surveyed advisors favor registered funds, such as BDCs and interval funds, over traditional private funds. This trend is especially pronounced among advisors serving clients with less than $5 million in investable assets, whereas advisors serving ultra-high-net-worth clients with assets above $50 million still prefer private funds, according to the survey.
The rising demand from advisors has spurred the proliferation of these registered products,2 enabling advisors to blend evergreen and drawdown product structures to accommodate client needs across different book sizes.
Challenges in Alts Adoption
Despite the growing adoption of alternatives, operational hurdles like elevated levels of administrative demands and paperwork remain in the way of greater alts adoption, with nearly half of advisors surveyed (48%) pointing to these processes as top challenges. Lack of liquidity, along with due diligence and compliance follow as top concerns for 36% and 29% of advisors, respectively, followed by high fees and expenses, according to 26% of respondents.
Meanwhile, 66% of surveyed advisors rank capabilities to integrate with other players in the alternatives’ ecosystem, such as custodians, reporting providers, and fund administrators as the most valuable. Another 60% of advisors consider analysis tools for scenario modeling and back testing as the most valuable in portfolio construction. The CAIS platform aims to address these needs with tools like CAIS Compass and streamlined workflows with more than 35 partners.
Private Markets Themes Gaining Momentum
As advisors deepen their engagement with alternatives, specific investment themes within private markets are emerging as areas of interest for advisors. CAIS and Mercer expanded the latest survey to find out themes on advisors’ radar. Tax-advantaged strategies were number one, with 39% of advisors planning to recommend them to clients. Next came artificial intelligence and infrastructure, with 28% of advisors saying they will introduce these private markets themes to investors in the year ahead. Other themes that allow advisors to align portfolios with macrotrends while tapping into unique growth opportunities include GP stakes (19%), venture capital (18%), and investments in sports and single or multifamily residential properties (15% each).
The Road Ahead
Alternatives are redefining wealth management, becoming integral to advisors’ strategies for differentiation and client growth. With tools like CAIS IQ and an expanding suite of solutions, the CAIS platform continues to deliver to advisors tailored, alternative investment strategies.
The future of alternatives looks bright in 2025, with innovations from CAIS paving the way for greater accessibility and scalability in this evolving landscape.
