The Future of Alternatives with John Bowman
12 June 2020
Alternatives such as private equity, private debt, hedge funds and real assets have become a bigger portion of the global investment market over the last 15 years. According to the CAIA Association, alternative investments could double from 12% in 2018 to nearly 24% by 20251. Further, access to alternatives may be aided by the Securities and Exchange Commission’s proposed changes to accredited investor rules allowing more investors to participate in private offerings.2 In this episode, I discuss the growth and outlook of alternatives with John Bowman, Senior Managing Director for the CAIA Association.
Democratizing Access to Alternative Investments
CAIA recently released a new report, “The Next Decade of Alternative Investments: From Adolescence to Responsible Citizenship” that looks at the growth and outlook of alternative investments. Two decades of lower interest rates have been a major driver of the growth of alternatives, particularly as pension funds sought to offset funding shortfalls. What stood out to me in the report was the notable trend of capital formation happening more and more in the private markets.
More companies are delaying IPOs and coming to market at much high valuations than the generation of companies before them. This is allowing private equity investors to capture a greater proportion of the returns. For regular, non-institutional investors, this may make you wonder why bother buying an IPO if it’s essentially just table scraps. More investors should have access to opportunities that tend to be the domain of institutions. This, of course, may come with more risk than individual investors have become accustomed to. That’s part of the challenge for the industry. Democratize access, do so ethically, and with a focus on education, transparency and diversification.
Trend or Fad
Listen for John’s take on artificial intelligence, baking at home, mass online learning and cryptocurrency.
1Source: CAIA Association, “The Next Decade of Alternative Investments: From Adolescence to Responsible Citizenship”, 2020.
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