Unleashing a new era of alternative assets
The alternative assets market is undergoing unprecedented growth, driven by the need for diversification and higher returns amidst economic uncertainty and market volatility. Global Assets Under Management (AUM) for alternative investments are expected to exceed significant milestones by the end of this decade, reflecting their increasing importance in investment portfolios. North America remains a key driver of this growth, with private equity AUM in the region experiencing substantial expansion since 2010 and expected to more than double in the coming years. In contrast, the Asia-Pacific region, while growing, is projected to lag the global average due to challenges such as the lower expected performance of China-focused funds. These regional variations highlight the interplay of geography, economic conditions, and investor preferences in shaping the alternative investment landscape.
The rising tide of demand: What fuels the surge in alternatives?
Investors are increasingly drawn to alternative assets as they seek to hedge against public market volatility, achieve diversification, and realize uncorrelated returns.
Alternative investments, though often associated with higher risks, also present opportunities for improved risk-adjusted returns. Integrating assets with varying risk profiles enables investors to enhance portfolio performance across different market scenarios. For example, private equity and venture capital provide access to growing companies, targeting substantial long-term returns. The democratization of private capital, fueled by technological advancements and evolving regulations, has made these assets more accessible to retail investors. Tokenization, powered by blockchain technology, is lowering barriers to entry by enabling fractional ownership of traditionally high- barrier assets like real estate and fine art.
Further, alternative investment fund managers are overcoming long-standing operational challenges with FinTech innovations that streamline processes, reduce costs, and improve efficiency. Platforms such as iCapital, CAIS, BRASSICA, Moonfare, and RealBlock have collectively raised over $1.2 billion in funding and manage $165 billion in assets, carving out distinct niches in this growing sector.
These factors, combined with innovation in product offerings such as hybrid funds blending private and public markets, along with ESG-focused strategies, are catering to evolving investor priorities, further enhancing the appeal of alternative assets.
Regulatory developments have played a critical role in democratizing alternative investments. The JOBS Act, enacted in 2012 and expanded in 2016, reduced accreditation barriers and opened asset classes such as real estate and private equity to a broader investor base, including non-accredited investors. Regulation A+, also part of the JOBS Act, allows companies to raise up to $75 million annually through a simplified registration process, offering greater access to private markets. In the U.S., the SEC has broadened the definition of accredited investors to include individuals with proven financial sophistication, paving the way for wider participation in private markets. Recent proposals also emphasize greater transparency in private funds by mandating detailed disclosures on fees, expenses, and performance. Across Europe, frameworks such as the European Long-Term Investment Funds (ELTIFs) are supporting investments in infrastructure and private equity. In the Asia-Pacific region, Singapore’s Variable Capital Company (VCC) and Hong Kong’s Securities and Futures (Amendment) Bill 2021 are driving growth, while Australia’s ASIC regulations are fueling opportunities in real estate and renewable energy.
Digital assets and cryptocurrencies have witnessed significant regulatory progress, fostering growth and trust in the sector. The EU’s Markets in Crypto-Assets (MiCA) regulation, effective December 2024, establishes comprehensive rules for transparency, investor protection, and market stability in crypto activities. In the UK, the Travel Rule mandates data sharing for crypto transactions to combat financial crime, while the U.S. has introduced stablecoin legislation requiring issuers to meet banking standards and maintain robust reserves. These advancements are transforming the digital asset ecosystem, strengthening its role as a legitimate and integral part of the global financial system. Further, launch of cryptocurrency ETSs is boosting confidence, with nearly half of traditional hedge funds surveyed this year reporting exposure to digital assets in certain geographies such as Asia Pacific and the U.S.
