How BlackRock and Goldman Sachs are bringing Wall Street’s hottest asset
Wall Street’s largest firms are championing a new cause. They are bringing alternative assets — once reserved for the ultra-wealthy — to the portfolios of individual investors. Chief among the proponents are BlackRock and Goldman Sachs. But, as is usually the case in investing, the potential of greater returns comes at a risk. “The alternative market is becoming less alternative,” said Jon Diorio, head of alternatives for wealth at asset management giant BlackRock. Alternatives are assets outside of stocks, bonds, and cash — including private equity, private credit, real estate, infrastructure, cryptocurrencies, and more. “It’s growing very rapidly as public markets are shrinking,” Diorio told CNBC in a recent interview. Interest has been fueled by shrinking public market opportunities and a softening regulatory environment. President Donald Trump signed an executive order earlier this month that paved the way for alternative assets in 401(k) retirement accounts — an idea vehemently opposed by the Biden administration. Diorio, who also leads product strategy for BlackRock’s U.S. wealth advisory business, said that giving more investors exposure to alternatives — which have traditionally been part of the portfolios of ultra high net-worth individuals, hedge funds, and pension funds — can improve returns over the long run. “In some cases, you can get enhanced diversification [and] amplify return streams,” he added. Giving individual investors the same access to different asset classes as the pros has been championed as further democratizing Wall Street. However, it also comes with its own risks. These assets are not publicly traded, which means they are more difficult to value and less liquid. BlackRock’s Diorio and peers at other major financial firms are acutely aware of this and strive to make sure investors are, too, as they challenge the decades-old focus on the traditional retail portfolio split of 60% stocks and 40% bonds. Marc Nachmann, head of the asset and wealth management division at Goldman, explained the risk dynamic in a recent CNBC interview , noting that “you actually get paid for the fact that [these] are illiquid and [that] you can’t take your money out all the time.” The inclusion of alternative assets, he said, is well-suited for investors with longer-time horizons or those who do not need to access their money right away, such as retirement savers. “Think about a 401(k). When you’re 24 years old and you graduate from college and you start your first job and you start putting your first real dollars into a 401(k) fund, those are exactly the dollars that you should put into something that pays you for being locked up for a period of time, for being illiquid. Because at 24, you’re not going to access that liquidity for decades,” Nachmann said. So, it’s no wonder the defined-contribution market has been a key part of Wall Street’s push to make the opaque asset class more accessible. In July, Goldman’s…
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