It turns out that a lot of asset management firms that are thought of as “institutional” are increasingly focused on retail investors.
According to the Wall Street Journal, and various conference call transcripts I’ve reviewed:
- Blackstone reported 15-20% of new capital inflows from individual investors.
- Carlyle gets 22% of in flows from high net worth individuals.
- KKR gets 10-15% of capital inflows from individual investors (and this was before they announced the tie up with FS Investments on the non-traded BDCs).
- Apollo’s AUM is 10-15% retail.
And it appears they’re just getting started.
Blackstone CEO Steve Schwarzman said on a conference call last year that they had “just begun to scratch the surface on the addressable market” for retail investors. He noted the rapid adoption of the Blackstone non-traded REIT (which accounted for 1/3 of the new ntREIT sales in 2017) . Yet:
… there are other initiatives of equal or even greater potential that… we're not ready to announce here today, as people tend to follow us.
Blackstone has trained over 3,500 financial advisers from brokerage firms on the benefits of investing in alternative assets. The impact of this sales force still hasn’t been felt. As for new products, Blackstone’s new interval fund launched at the beginning of this year.
Apollo’s senior managing director, Josh Harris noted:
We’re investing in the marketing resources we need to attack retail [investors] in multiple ways… We've always been great manufacturers of return. Increasingly, we are just now making those products available and suitable for retail, which is different.
Apollo’s CFO noted that they were seeing a lot of growth and momentum through its relationships with retail advisors.
Carlyle is subadviser on a new interval fund in registration. Nonetheless, it is a bit more nuanced with its approach to attracting more retail money. According to David Rubenstein, co-founder and co-executive chairman of Carlyle:
[I]t costs more money to raise money [in retail] than when you are doing it with internal fundraisers because you're typically paying a fee to the third party that is helping you. And it depends on the arrangement. Sometimes you pay a onetime fee. Sometimes you pay that out over a period of time. Sometimes in some arrangements you might actually pay them some profit participation as well. The advantage of it is that you have typically a situation where some people come into these kind of funds, they get to know you and the next time they might come directly to you. Therefore, you don't have the same additional fee.
KKR recently expanded its non-traded BDC platform by launching a platform with FS Investments. Jim Burns, head of KKR's individual-investor business, said in an interview last year:
Historically, the biggest pools of capital were institutions, but those are finite pools of capital, and they aren't really growth pools.
Back in 2014, McKinsey stated that the retail segment was the primary segment of alternatives growth. It appears that trend is continuing.