Alternative Investments Went Mainstream. Did Your Reporting?

I recently came across a Cerulli report estimating that U.S. financial advisors already allocate roughly $2.2 trillion to less-than-fully-liquid private capital. Cerulli expects advisor-intermediated private market assets to grow by another $2 trillion over the next five years.

It’s a big number, but that wasn’t actually the part that stuck with me.

Most of the conversation around the growth of private markets in wealth management has understandably focused on access. New vehicles, new structures and new ways to bring private equity, private credit and other alternative investments into more client portfolios. BlackRock’s recent advisor research gives some sense of how quickly that is happening: 56% of advisors surveyed said they use private markets in client portfolios, up from 49% in 2023, with adoption expected to reach 69% by 2027.

What I find more interesting is what happens after those investments make it into the portfolio.

Because the client doesn’t suddenly start thinking in terms of a public portfolio and a private portfolio. They see what they own. And eventually, they expect their advisor to be able to explain all of it.

Which raises a question I think wealth firms should be asking: If the definition of a complete portfolio has changed, has our definition of a complete client report changed with it?

Getting the asset onto the report was only the first problem

For a long time, much of the challenge around alternative investment reporting was simply inclusion. Can we capture the asset? Can we value it? Can we get it onto the statement alongside everything else the client owns?

However, I think we need to start raising the bar. Think about an advisor preparing for a client meeting. The household owns traditional securities alongside several private investments. One private fund has a recently updated valuation while another is still carrying the previous quarter’s value. A capital call came through recently. Another investment made a distribution. Some of the information came through the custodian, some directly from the manager and some may still be sitting inside a document or portal.

It’s entirely possible for every one of those investments to appear correctly on the client report while the advisor still has some homework to do before the meeting.

The next challenge for alternative investment reporting isn’t simply inclusion. It’s context. Can the advisor tell how current the information is? Can they understand what changed and why? Can they see whether recent capital activity has been reflected? Can they understand how the private allocation fits into the rest of the household without opening several other systems to reconstruct the story?

If not, technically complete and actually useful may be two different things.

The reporting problem usually starts somewhere else

Anyone who has worked with private asset data knows the messy part usually starts long before the client report.

A valuation comes from one place, capital activity from another. Some information is structured. Some of it is sitting in a PDF, spreadsheet or manager portal. Valuation dates vary, identifiers aren’t always consistent and the terminology used by one source doesn’t necessarily line up neatly with another.

At a smaller scale, firms can compensate for a surprising amount of this with institutional knowledge. Someone knows which portal to check, recognizes that a manager changed the format of a file, or knows that the number in one system doesn’t yet reflect the latest capital call.

And, for a while, that can work.

The problem is that private markets aren’t moving in the direction of less adoption. Cerulli has also found that more than half of the asset-manager and third-party model providers it surveyed either currently offer or are considering models containing semi-liquid or illiquid alternatives, with advisor demand among the reasons providers cite for doing so.

As alternative investments move across more client relationships, processes built around people knowing where to look become much harder to scale.

That’s why I tend to think about alternative investment data management less as a question of how much information a firm can collect and more as a question of what happens to the information once it arrives. Can the firm consistently identify it, classify it, validate it, and connect it to the right investment? And then, can that happen without someone downstream having to rediscover what the data means every time they use it?

Getting more data through the door is useful. Making it usable is the harder part.

More access creates a downstream question

There’s a lot to like about expanding access to alternative investments. But I think there’s a tendency to treat access as the finish line when, operationally, it’s closer to the beginning.

Every new private investment creates information that has to go somewhere. There are valuations to maintain, capital calls and distributions to account for, documents to process and performance to understand. As those investments spread across more households, all of that eventually has to connect back to the advisor and client experience.

And the operational burden may not grow neatly in proportion to the allocation.

A 10% private market allocation doesn’t necessarily create “10% more reporting work.” The nature of the information is different, which means the processes required to support it can be different too.

That’s the part of the private-markets growth story I think deserves more attention. Making an investment easier to access does not automatically make it easier to report, measure or explain.

We shouldn’t solve that by pretending every asset is the same

There’s another side to this that’s important.

If the problem is inconsistency, the obvious answer can seem like standardization. And there are plenty of places where more standardized private market data would make life easier.

But there’s a limit. A private equity investment valued quarterly shouldn’t look as though it has the same pricing characteristics as a publicly traded security. A capital call isn’t just another transaction. Private credit carries considerations that are different from public fixed income. In some cases, knowing when a valuation was produced and where it came from is part of understanding the valuation itself.

Those differences aren’t noise we need to remove. They’re part of the investment.

So I don’t think the goal should be to make private investments behave like public ones inside the reporting process. The goal should be to make the differences understandable without requiring the advisor to become the integration layer.

That matters particularly when we get to alternative investment performance reporting. A return can be mathematically correct and still need context. What period are we looking at? How current is the underlying valuation? What cash flows occurred during that period? How should that result be understood alongside investments that are priced much more frequently?

The client may never ask those questions in those terms.

They might simply ask, “How am I doing?”

But someone has to be ready to answer.

Maybe “complete” is the wrong thing to measure

The more I consider this, the less convinced I am that completeness should be defined by whether every investment appears on the report.

That’s certainly part of it. But it doesn’t tell us whether the report is doing what the advisor actually needs it to do.

If every holding is present, but the advisor still has to leave the report to figure out which valuation is current, whether recent capital activity has been reflected, or how the private allocation is affecting the broader portfolio, then we’ve achieved one kind of completeness while missing another.

Maybe the better test is whether the information is complete enough to make a decision or have the conversation.

Can the advisor look at the portfolio and understand what changed? Can they tell what information is current and what isn’t? Can they explain performance in the appropriate context to their client? Can they see how public and private investments fit together without rebuilding that view somewhere else?

That’s a different standard for reporting, and it puts much more emphasis on what happens underneath the report itself: how data is collected, normalized and maintained; how performance is calculated; and how context travels with the information as it moves through the organization.

As alternative investments become a more ordinary part of wealth management, I think firms will have to look beyond whether their reporting systems can accommodate them and ask whether their operating model actually supports them. That means looking at the entire path from the moment private-market information enters the organization to the moment an advisor has to use it in a client conversation.

Because ultimately, the opportunity isn't to make private markets less complex. It's to make sure that complexity doesn't get passed downstream to the advisor or the client.

Clients already see one portfolio. The question is whether the people serving them can see one too.

Research sources:

• Cerulli — Private Markets Set to Add $2 Trillion in Advisor-Intermediated Assets Over Next Five Years — 
• BlackRock — Unlocking Private Markets: Advisor Trends and Opportunities — this is 
• Cerulli — Simplifying Retail-Channel Private Markets Adoption: Alternative Asset Allocation Models —