Present-day portfolios have undergone a significant change in their construction. What used to be a small part of finance that only institutions and the wealthy could access has grown into a $20 trillion market that is changing how advisors think about asset allocation, speaking to clients, and their own professional skills. There is a silent revolution going on: the gap between public and private markets is becoming less clear at a speed that few expected. Changes in access to information, rules, and a once-in-a-generation cycle of capital spending related to AI infrastructure and the switch to sustainable energy are all to blame for this. The question is no longer whether to use alternatives but how to do it wisely and at scale.   

The numbers are clear   

The results of the 2025–26 CAIS-Mercer study of around 800 financial advisers tell a clear story: nine out of ten advisors already invest in alternatives, and 88% aim to increase such investments over the next two years. This is the fourth year in a row that advisors have said they want to do this. About half of advisers now put more than 10% of their clients' portfolios into alternatives. This indicates that alternatives are now a key part of diversified wealth plans. Private debt (89%), private equity (86%), and real estate (85%) remain the top asset classes advisors are currently allocated to, while more than half expect to increase infrastructure allocations — up from just 32% in 2023. These are not small changes. These changes indicate the need for a re-evaluation of the structure.   

Why now? The big picture for alternatives   

The reasons for investing have become much clearer. Inflation came back in the early 2020s, which showed how weak the typical 60/40 portfolio was, especially the way bonds have always been a reliable way to spread out risk, leading investors to seek alternative investment strategies that could provide better returns and diversification. At the same time, it has become harder to make money in public equity markets since they are becoming more efficient and connected, leading investors to seek alternative investment strategies such as private equity, which has shown significant growth and returns in recent years. Over $1.3 trillion in private equity transactions occurred in the first three quarters of 2025. Growth, value creation, and deal exits were driven by the AI and healthcare industries, particularly as advancements in technology and increased healthcare needs have led to innovative solutions and investment opportunities. At the same time, the private credit market has increased from $250 billion in 2007 to $2.5 trillion now. This has created a lot of new opportunities for disciplined investors as demand rises, particularly in sectors such as technology and healthcare where innovative solutions are in high demand. Infrastructure is also seeing a rise. As artificial intelligence and data growth happen quickly, the need for stronger power generation and distribution is growing swiftly. Data centers are expected to triple their power requirements by 2030, necessitating significant new investment. Advisors that work with clients who have real assets or infrastructure funds should definitely talk about these macro tailwinds.   

Democratisation: A change in structure, not a trend   

The most essential difference may be who can now receive alternatives. The SEC has extended the definition of "accredited investor" to include persons who have a lot of money and also have professional experience and expertise that show they know how to handle money. An executive order from the president in August 2025 changed the rules, making it easier for regulators to let 401(k) plans accept other types of investments. 80% of advisors working with non-accredited clients already invest in alternatives. This indicates that the process of democratizing investments has already begun. On the other side, 82% of advisors prefer evergreen funds, either alone or in addition to drawdown vehicles, because they are more flexible and easier to access to.   

Practical implication   

Advisors must reconsider the notion that alternatives are solely beneficial for high-net-worth or institutional clients. Evergreen and interval fund formats now let more clients take part with periodic liquidity, meaning that investors can access their funds at regular intervals. This is a big improvement over typical drawdown vehicles, which have extended lock-up periods and J-curve effects. This is a big improvement over typical drawdown vehicles, which have extended lock-up periods and J-curve effects.   

What this means for wealth professionals   

Moving to alternatives is not just a problem for building a portfolio; it is also a problem for professionals. Advisors now prioritise expanding alternatives ethically and economically over questioning their necessity. Analytics, integrations, and digitization are now at the top of advisors' lists of things to do.   

Think about three real-world needs that today's wealth manager has:   

1. The amount of due diligence. Private credit funds are not all the same. The quality of credit is a significant concern for individuals, particularly for vintages produced during periods of high prices. In a higher-rate climate, maintaining discipline in underwriting and proactively managing your portfolio becomes increasingly crucial. Advisors need ways to look at managers' past performance, loan-level transparency, and sector concentration. These are very different from the skills needed for public market analysis.   

2. Managing liquidity. To add illiquid assets to client portfolios, you need to think carefully about matching liabilities. A client who has a three-year liquidity event, such as selling a business or buying a large piece of property, can't fully commit to a seven-year PE fund. Advisors need to help their clients locate solutions that work for their specific liquidity timeframes, not just their risk tolerance.   

3. Teaching the client. Democratization makes it more important to have clear disclosures, norms for suitability, and education for investors. Many new and existing high-net-worth investors who are new to alternatives don't have a good understanding of terms like the J-curve, capital calls, continuation vehicles, or valuation lag. Wealth professionals who spend time teaching their clients through organized onboarding, plain-language reporting, and regular scenario talks will establish stronger, more trusting relationships.     

Model portfolios and technology: The way to scale   

Operationally, the industry is converging on model portfolios as a key mechanism for scaling alternatives access. More than three-quarters of advisors are using or considering utilizing model portfolios for alternative investments. Almost half of them rely on them as their main source when deciding how much to put into alternatives. At the same time, secondary markets are rising swiftly and giving us new options to handle liquidity. The secondaries market had $226 billion in transactions in 2025, which was a 41% rise from the year before. This indicates that the market has changed from being a specialist liquidity option to a core private markets investment strategy. For advisers who are helping clients leave long-term funds, secondaries are now a real and liquid choice.     

The risks that need attention   

There can't be a full discussion of options without a clear look at the risks. Valuation opacity is still a problem. Private asset valuations are only updated every so often, not every day, which might make it seem like things are stable when they are actually changing a lot. Fees in private markets are getting lower, but they are still greater than those in public exchanges, which can impact overall investment returns and investor sentiment. And picking the right manager is everything: the difference between the best and worst private equity managers is much bigger than the difference between the best and worst public equity managers. Infrastructure is getting better after a challenging two years. Private infrastructure is picking up speed again after weaker fundraising, fewer deals, and more uncertainty in the economy as a whole. Capital is now going to the biggest managers in the business. Advisors should be careful of new managers in this area who don't have a long history of success across a full cycle, as these managers may lack the experience needed to navigate economic fluctuations and could pose a higher risk to investors.   

The bottom line   

The growth of alternatives is not just a temporary trend; it shows how capital markets are changing over time. Because private markets are now valued around $20 trillion, many companies are staying private longer. Changes in regulations are also allowing more possibilities in retirement plans, which means that more people can participate in these markets, such as through self-directed accounts or alternative investment options that were previously restricted. The job of wealth management professionals is clear: they need to develop the skills, tools, and ways to talk to clients that alternatives require. Those who do will be able to get customers greater risk-adjusted returns and become essential advisors in a market that is only getting more complicated—and more rewarding—for those who know how to manage it properly. 

(The author is professor (finance) and director – Masters of Applied Finance & Wealth Management, SP Jain School of Global Management. Views are personal.)