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The pandemic-driven market volatility has advisors rethinking client allocations – with many favoring private market and hedged strategies

We recently reached out to the iCapital Advisor Network, which includes RIAs, private banks, family offices, and qualified purchasers, for their views on market volatility and current portfolio positioning. According to the survey results, viewable in the infographic below, 75% of respondents expect volatility to continue for another 6-24 months, with 69% reporting that they have adjusted or are planning to adjust client portfolios as a result. While 18% of advisors are moving to reduce risk, 69% see opportunity in the current environment and are reshuffling portfolios with a goal of improving client outcomes.

As advisors reallocate client portfolios, they are reporting increased consideration for alternative investments, with 50% of respondents more likely to consider private equity today compared with six months ago. Hedge funds also saw a boost in interest, with 34% of respondents more likely to consider hedged strategies versus six months ago.
Among alternative investments, private equity, private credit, and hedged strategies are drawing the most assets among survey participants. More than 80% of respondents said they are overweighting private equity, along with cash, while more than 50% of respondents reported overweights to private credit and hedged strategies, in addition to overweights to public equities. Meanwhile, more than half of respondents reported underweight positions in bonds, real estate, and commodities.
Following the financial crisis, investors enjoyed a decade-plus bull market that saw equities return more than 300%. Today, however, pandemic-fueled volatility and a very uncertain market outlook have many advisors and clients seeking a steadier ride as well as diversified sources of return. iCapital recently published an analysis that found adding a 20% private equity allocation to a traditional 60%/40% stock/bond portfolio may enhance return potential while mitigating risk. In today’s market, this attractive combination is likely to further fuel interest in alternative investments.

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This material is provided for informational purposes only and is not intended as, and may not be relied on in any manner as legal, tax or investment advice, a recommendation, or as an offer to sell, a solicitation of an offer to purchase or a recommendation of any interest in any fund or security offered by Institutional Capital Network, Inc. or its affiliates (together “iCapital Network”). Past performance is not indicative of future results. Alternative investments are complex, speculative investment vehicles and are not suitable for all investors. An investment in an alternative investment entails a high degree of risk and no assurance can be given that any alternative investment fund’s investment objectives will be achieved or that investors will receive a return of their capital. The information contained herein is subject to change and is also incomplete. This industry information and its importance is an opinion only and should not be relied upon as the only important information available. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed, and iCapital Network assumes no liability for the information provided.

Products offered by iCapital Network are typically private placements that are sold only to qualified clients of iCapital Network through transactions that are exempt from registration under the Securities Act of 1933 pursuant to Rule 506(b) of Regulation D promulgated thereunder (“Private Placements”). An investment in any product issued pursuant to a Private Placement, such as the funds described, entails a high degree of risk and no assurance can be given that any alternative investment fund’s investment objectives will be achieved or that investors will receive a return of their capital. Further, such investments are not subject to the same levels of regulatory scrutiny as publicly listed investments, and as a result, investors may have access to significantly less information than they can access with respect to publicly listed investments. Prospective investors should also note that investments in the products described involve long lock-ups and do not provide investors with liquidity.

Securities may be offered through iCapital Securities, LLC, a registered broker dealer, member of FINRA and SIPC and subsidiary of Institutional Capital Network, Inc. (d/b/a iCapital Network). These registrations and memberships in no way imply that the SEC, FINRA or SIPC have endorsed the entities, products or services discussed herein. iCapital and iCapital Network are registered trademarks of Institutional Capital Network, Inc. Additional information is available upon request.

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Diane Frankenfield

Diane Frankenfield

Diane is a Managing Director and Chief Communications Officer at iCapital. She is also a member of the company's Operating Committee. Prior to joining, Ms. Frankenfield was Managing Director, Head of U.S. Marketing at Legg Mason. She has a BS in Finance from Pennsylvania State University and an MBA, Business and Industry Economics, from Bentley University and holds FINRA Series 7, 24 and 63 licenses. Additionally, Diane is a Harvard University-certified instructor in business negotiations. See Full Bio.