Alternative Investments: The Gap Between Advisors & Investors

New investment vehicles like interval funds have swiftly expanded access to private markets. About a quarter of retail investors already hold private equity investments, Morningstar’s 2025 Voice of the Investor study shows. That number rises to 35% among those with $500,000 or more in investable assets.

However, these new vehicles come with risks: higher average fees, widely used leverage, and potential liquidity constraints.

What do investors and advisors each expect from alternative investments, and how can they bridge that gap?

These insights are based on Morningstar’s Voice Of market research program, which uncovers key insights and trends across major industry segments and global regions. This report draws on insights from over 2,000 nationally representative individual investors alongside input from more than 250 financial advisors across the United States.

Both investors and advisors recognize the potential value of alternative investments, but their primary motivations for engaging with these complex assets often differ. Investors are looking for higher returns and tax benefits, while advisors add alternatives to portfolios for diversification and risk management.

As more investors explore alternatives, advisors have to be ready to set clear expectations and stay aligned with client goals and priorities.

Today, 56% of investors have invested in at least one type of alternative or private investment.  

Looking across generations and income ranges, a clear trend emerges: younger people and higher-income households are increasingly embracing a broader range of alternatives. Advisors serving these client segments must be prepared to discuss the impact. 

Despite this growing interest, even engaged investors might only invest in two or three types of alternatives, most commonly cryptocurrencies and private equity. To anticipate growing demand, advisors should be prepared to help clients navigate a range of new, different preferences.

Despite a growing market opportunity, 28% of US advisors don’t offer alternative options to their clients.  

When asked, they cite complexity as the primary deterrent, saying alternative offerings require increased expertise, technology, and operations to fully support investors. 

Direct Advisory Suite empowers advisors to confidently consider the value of private investments in client portfolios.

Data and analytics bring clarity to private investments, and Direct Advisory Suite helps advisors see the possibilities. Bring alternatives into analysis, create proposals, and deliver comprehensive service.

The application now includes new capabilities to address complexities around alternative investments:

• Investment Research – Advisors can screen, evaluate, and compare private assets. New filters identify interval and tender offer funds in the closed-end fund universe.
• Insights and Industry Research – Private-market investment vehicles can be some of the most complex in the industry. Direct Advisory Suite lets advisors easily find relevant Morningstar articles on alternatives. Tap into a central hub for ongoing education and client conversations.
• Risk Profiling and Scoring – Create portfolios, proposals, and reports that include public and private investments. Visualize risk impacts, show the percentage of private investments, and create AI-assisted talking points.
• Portfolio Creation and Analysis – Capture client preferences on nonliquid investments and align portfolio recommendations to their risk tolerance. The Morningstar Portfolio Risk Score now accounts for private capital funds. Advisors can easily visualize the breakdown of risk from volatility and liquidity.