- Merrill Lynch reported a significant rise in clients’ alternative investments from a year ago.
- Bank of America’s wealth management business has expanded that team aggressively.
- At the big wealth managers, a wide menu of these investment options are becoming table stakes.
Merrill Lynch Wealth Management clients have been piling money into investments like private equity and venture capital, the firm’s president told reporters on Monday, as they look for alternatives to stocks and bonds.
Bank of America’s wealth business reported a rise of 40% to some $71 billion of alternative assets under management from a year prior. Merrill President Andy Sieg said the firm, which oversees $3.1 trillion in client balances overall as of March, is investing in its alternative investment capabilities.
Sieg said that Merrill has hired some 50 employees focused on non-mainstream assets, like staff who conduct investment due diligence or specialize in product origination, since the fall. The dedicated team is now 150 employees in total, a spokesperson said.
“This is putting us in a position to onboard and launch new funds at a greater rate,” Sieg said Monday after Bank of America reported its quarterly earnings results.
The firm’s alternative assets under management have grown in recent years alongside the growth of the private equity and debt markets. Private market assets under management swelled to an all-time high of $9.8 trillion in 2021, according to figures from McKinsey published last month.
Last fall firm said it was adding new alternative investment options and resources for its financial advisors, as a way to try and retain employees, Insider reported at the time. A few weeks later, Merrill lowered the minimum amount needed for eligible accredited clients to invest in some of these assets such as private equity funds.
A Merrill spokesperson said that in the first quarters of 2019, 2020, and 2021, the business oversaw approximately $38 billion, $47 billion, and $51 billion of such assets, respectively. Merrill’s overall client balances slipped from a record $3.2 trillion in the fourth quarter.
“The alternative industry has moved forward very far over the last five years in terms of developing new products and capabilities that are better suited for retail investors. At the same time, we have expanded our capabilities to be able to support these products more fully,” such as fitting them into performance reporting more simply, Sieg said Monday.
At the largest wealth management firms like Merrill, Morgan Stanley Wealth Management, and UBS Global Wealth Management, a healthy menu of such investment options are becoming table stakes. UBS clients had some $150 billion of invested assets in private markets at the end of 2021, filings show.
These firms are not only competing with each other’s legacy businesses. They are competing with a crop of well-funded startups like iCapital, Yieldstreet, and Masterworks aimed at getting alternatives into the hands of more investors.
With a volatile US stock market that has been rocked by geopolitical uncertainty this year with Russia’s invasion of Ukraine and rising interest rates, private market valuations have not been immune from the turmoil. But Sieg noted that in the turbulent market environment, allocations to alternatives — which tend to perform independently of public markets — have helped diversify portfolios.