Private Equity and Credit Still Favored by Advisers Despite Liquidity Concerns

Attracting prospective clients is the primary incentive driving U.S. financial advisers to incorporate alternative assets into their recommended line‑ups, according to the 2025 iCapital Global Advisor Survey released this week.

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The study, carried out by an independent research firm in the first quarter of 2025, gathered responses from 603 licensed professionals across the private‑wealth, broker‑dealer, and registered investment adviser channels in nine different countries.

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During initial telephone interviews and subsequent online questionnaires, advisers consistently identified four alternative categories—private equity, private credit, hedge funds, and real estate—as their preferred destinations for client capital.

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Two‑thirds of survey participants, or 66 percent, said they were actively looking to place client funds in private‑equity strategies, citing the potential for outsized returns compared with public markets.
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Private‑credit funds drew interest from 54 percent of advisers, reflecting growing comfort with direct‑lending structures that can deliver steady income streams and floating rates in a higher‑for‑longer environment.
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Hedge funds captured another 54 percent endorsement, suggesting that diversified, long‑short, and multi‑strategy vehicles remain central to many advisers’ risk‑management playbooks despite recent fee pressure.
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Real‑estate investments—ranging from core commercial properties to opportunistic development projects—appealed to 44 percent of respondents, underlining property’s enduring role as both an inflation hedge and a yield enhancer.
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Enthusiasm fell sharply beyond those four stalwarts: only 26 percent of advisers signaled appetite for venture‑capital allocations, and a mere 21 percent favored “other real assets” such as infrastructure, timberland, or commodities.
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The survey also probed expectations for “evergreen” funds—open‑ended private‑market vehicles designed to provide continuous subscription windows and periodic liquidity rather than a fixed drawdown cycle.
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A commanding 77 percent of advisers predict that, within two years, evergreen structures will represent 11 to 15 percent of their average client portfolio. An additional 22 percent envisage evergreen allocations between 5 and 10 percent, underscoring a widespread belief that simplified access could boost mainstream adoption.
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Yet translating that optimism into action remains difficult because, advisers say, the alternative‑investment universe still presents significant operational and analytical obstacles.
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Fifty‑five percent named the challenge of gauging liquidity, valuation accuracy, and overall risk profile as the single biggest deterrent to deeper penetration.
Another 53 percent worried about modeling how an illiquid sleeve would interact with public‑market holdings when constructing or rebalancing a diversified multi‑asset portfolio.
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Roughly half of advisers—51 percent—lamented a shortage of institutional‑quality products and turnkey model portfolios that meet fiduciary and performance standards.
Almost as many, 48 percent, pointed to compliance requirements, including enhanced due‑diligence checklists and disclosure obligations, as a serious drag on efficiency.
Forty‑two percent cited an underlying deficit of educational resources—for staff, clients, or both—that would clarify jargon, fee structures, and performance metrics.
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Less urgent but still notable hurdles included inadequate client‑reporting functionality (20 percent) and cumbersome documentation or data‑gathering processes needed for due diligence (13 percent).
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Eligibility rules that limit access to accredited or qualified purchasers bothered 13 percent of respondents, while 11 percent blamed simple lack of product availability on their preferred platforms.
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Only one in ten advisers described the complexity of alternative instruments themselves as a prohibitive factor, suggesting that practitioners believe most structural intricacies can be mastered with time and training.
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Although the survey spanned nine countries, U.S. advisers were the most vocal about using alternatives to differentiate their practices in an increasingly commoditized, index‑heavy landscape.
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Many respondents emphasized that adding non‑traditional strategies helps spark conversations with sophisticated prospects and signals proactive portfolio stewardship.
Client motivation, however, goes beyond novelty: advisers noted that persistent inflation, geopolitical friction, and elevated equity valuations have amplified the quest for uncorrelated return sources.
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Private‑equity and private‑credit managers, for instance, can capitalize on dislocations within middle‑market lending or carve‑out acquisitions—opportunities less accessible in public markets.

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Hedge‑fund operators can dynamically adjust exposure to navigate short‑term volatility, while real‑estate holdings may provide steady cash flow together with the prospect of appreciation as urbanization and infrastructure investments expand.
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Even so, advisers admitted that integrating these vehicles requires robust technology, prudent cash‑management strategies, and ongoing dialogue with fund sponsors to monitor gates, capital calls, and distribution schedules. Some firms are experimenting with sleeve‑level liquidity programs or interval funds to give retail clients quasi‑institutional exposure without locking up capital for a decade.
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Others rely on third‑party managers to bundle diversified pools of secondary interests, thereby reducing the J‑curve effect and providing earlier cash‑flow visibility.
As alternative platforms evolve, respondents expect education gaps to narrow, especially with regulators promoting standardized disclosures around fees, leverage, and ESG considerations.
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Advisers urged fund providers to offer transparent, user‑friendly dashboards that integrate seamlessly with existing portfolio‑management systems and client portals.
They also pressed for clearer benchmarking tools so investors can contextualize performance across different vintages, strategies, and regions.
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Despite the obstacles, the survey portrays a profession in transition: advisers are no longer treating alternatives as esoteric side dishes but as essential ingredients in a modern, resilient allocation framework.

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Declining public‑equity beta, compressed bond yields, and broader acceptance of illiquidity premiums all contribute to the shift.
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If technology and product innovation continue apace, evergreen formats and lower minimums could democratize access further, allowing mass‑affluent households to reap benefits once reserved for endowments and pension funds.
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In that scenario, advisers who master liquidity analytics, compliance nuances, and narrative framing may gain a durable competitive edge in the race for assets under management.
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The iCapital survey concludes that the next two years will likely prove pivotal as the advisory community balances client demand for differentiated returns with prudent oversight of risk, transparency, and operational practicality.

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