• This article explains the reasons behind the significant growth and potential of the alternative assets industry worldwide, according to the III Annual Report of the Asset Securitization Sector.
• The content is aimed at asset managers who wish to delve deeper into alternative assets as an option to optimize their own investment portfolios and those of their clients.
• FlexFunds offers an asset securitization program that enhances the liquidity of alternative assets and facilitates their distribution across multiple international private banking platforms. For more information, feel free to contact our experts (contact form).

Alternative assets continue to gain ground in investment portfolios. These assets offer diversification and superior long-term returns.

This trend is accelerating in a context where the correlation between equities and bonds has been inconsistent: over the past 50 years, it has been positive 66% of the time, especially in high-rate environments.

This represents a key challenge for portfolio management.

Including alternative assets not only captures the illiquidity premium—enhancing return potential—but also diversifies risk, creating a more attractive risk-return profile.

This helps mitigate volatility in uncertain markets, where fluctuations can erode the value of traditional portfolios.

Alternative assets cover a wide range—from private equity and private credit to real estate and infrastructure. Each plays a unique role in a diversified portfolio, aligning with specific objectives such as capital appreciation or stable dividends.

The key trends driving alternative assets

According to Maricarmen de Mateo, CFA, head of alternative assets at Vinci-Compass, there are three key trends shaping the landscape.

“These trends not only reflect the sector’s growth but also illustrate how alternative assets can be effectively integrated into broader investment strategies,” stated the executive in the III Annual Report of the Asset Securitization Sector, prepared by FlexFunds in collaboration with Funds Society.

Growth of private wealth and semi-liquid funds

Historically, alternative assets were reserved for institutional investors and large family offices. These groups have consistently increased their exposure—today representing 54% and 43% of their portfolios, respectively, compared to 47% and 27% a decade ago.

Now, the wealth management segment is joining this wave. More and more managers are launching semi-liquid funds, which are highly attractive to a broader investor base. Why? They offer key benefits that democratize access to this asset class:

• Better access: Lower minimum investment amounts than traditional illiquid funds, and generally available on platforms, expanding the investor universe.
• Immediate exposure upon subscription: Investors benefit from compounding returns from day one and avoid the complexity of managing capital calls and distributions.
• Greater liquidity: Periodic windows for subscriptions and redemptions, with predefined limits.

“Since 2019, more than 300 semi-liquid funds have been launched, tripling the assets under management in this structure to USD 350 billion as of December 2024. Overall, this structure facilitates the start of alternative investment programs, enabling alpha capture without excessive commitments. For investors new to the space, it represents a gradual entry point, avoiding the complexity of long-term commitments typical of traditional private funds,” said de Mateo.

The boom of the secondary market

The secondary market for private funds has grown exponentially since its inception 30 years ago, setting new records each year. In 2024, transaction volume reached USD 158 billion and is expected to exceed USD 200 billion in 2025.

Investors are turning to the secondary market for liquidity solutions due to regulatory reasons, active portfolio management, or continuation vehicle structures by managers.

Liquidity demand in the secondary market exceeds supply, exacerbated by limited distributions over the past three years. The result: highly favorable conditions for buyers, with attractive entry multiples enabling the acquisition of positions at a discount.

Investing in secondary funds has delivered consistent results and is expected to continue doing so. Key advantages include:

• Diversified access: To vintages, managers, and funds through a single commitment—facilitating vintage catch-up and initiation of alternative programs. This enables historical exposure without waiting for new investment cycles.
• Revaluation and discounts: Mitigates the J-curve, reduces volatility and ratios, while delivering returns above the public market.

“As noted in a recent Preqin report, growing demand positions secondary funds as an essential portfolio tool, offering stability in volatile times. In periods of economic uncertainty, where primary fund distributions are limited, secondaries act as a bridge to maintain liquidity without sacrificing upside potential,” stated de Mateo in the III Annual Report of the Asset Securitization Sector.

Preference for mid-market buyouts

Investors with mature programs are favoring buyout funds focused on mid-sized companies (mid-market buyouts) over mega funds targeting large caps. The reason? Higher expected returns.

Mid-market funds have historically delivered higher returns than mega funds, albeit with greater volatility. This is driven by:

• A broader and more fragmented investable universe, reducing competition and resulting in lower entry multiples—allowing acquisitions at more attractive valuations.
• Lower leverage in portfolio companies—key in high-rate environments, where excessive debt can significantly affect profitability.
• Multiple exit routes—not only IPOs but also sales to strategic buyers or other private equity managers—providing flexibility for realizing gains.

These funds have the potential to enhance average returns, and this trend underscores the search for efficiency in a market that, for some, has become saturated with large-scale transactions.

“Alternative assets continue to expand, and we expect this trajectory to persist. Despite challenges in analysis, sophistication, and operations—such as the need for detailed evaluations and the management of complex structures—the opportunities within their sub-classes are vast, aligning with goals of diversification and volatility reduction,” concluded de Mateo.

To learn more about alternative assets in professional portfolio management, you can download the III Annual Report of the Asset Securitization Sector 2025–2026, prepared by FlexFunds in collaboration with Funds Society, which provides detailed statistics on this ever-growing sector.