Business Breakdowns, EP.234: Alternative Investing – Alts For All (November 7, 2025)

Episode Overview

This episode, hosted by Matt Reustle, features Josh Clarkson, Managing Director at Proceq Partners, returning to discuss the democratization of alternative investments (“alts”). The focus is on the rising access of individuals—particularly retail investors and those with retirement accounts—to alternative asset classes such as private credit, real estate, and private equity. The conversation dives deep into the size of the opportunity, regulatory background, product evolution, risks, marketing practices, competitive landscape, implications for fees, investor education, and who stands to benefit most from this transformative trend.

Key Discussion Points & Insights

The Scale of the Opportunity

• Alternative Investing “Going Mainstream”: The conversation opens by noting that if individuals (“the retail private wealth channel”) increase their allocation to alternatives towards institutional levels (from ~2-5% up to 15-20%), Morgan Stanley estimates a $4 trillion market opportunity for alternative asset managers.

  “$4 trillion is a pretty big number. It's the GDP of Japan actually... that's where Morgan Stanley analysts put the opportunity for the large alternative asset managers in terms of growth over the next few years.”
  — Josh Clarkson (04:15)

• AUM Implications: Alts managers currently oversee $20–22 trillion in assets, so this wave would be a material step-up. Notably, $4 trillion also matches the estimated US retirement savings shortfall.

Recent Headline Events & Risk Perceptions

• Addressing Concerns: Recent industry headlines around failed companies (First Brands, Tricolor) are covered, emphasizing that these are not emblematic of alternative asset market risks—but of fraud and liquid market failures.

  “It wasn't all private credit, but it was many private credit firms pushing for greater transparency and deeper diligence that brought the house of cards down, so to speak.”
  — Josh Clarkson (07:25)

• The Role of Diligence: Private credit due diligence and transparency have actually acted as risk mitigators compared to liquid markets.

  “Direct lending and private credit is a far better, far safer way to do it than the liquid markets.”
  — Josh Clarkson (08:22)

Regulatory Evolution

• Recent Regulatory Changes: The most significant change was a Trump-era executive order mandating ERISA (overseeing 401k plans and DC plans) consider including private markets, reversing previous restrictions; various other regulatory tweaks around marketing, fund liquidity, and product structure are ongoing.

  “The Trump executive order… is certainly viewed as the largest, biggest change recently that opens a whole new market.”
  — Josh Clarkson (08:59)

• Historical Perspective: Much of US securities regulation was born out of Great Depression-era abuses, with periodic revisions opening alternatives inch by inch to broader markets.

Product History & Liquidity Lessons

• Older Retail Alternatives: Pre-2015, options were limited: non-traded REITs, attempt-at-alts ETFs, reinsurer vehicles, closed-end funds—mostly niche, with tangled structures.
• Modern Semi-Liquid Channel: Breakthrough came with Blackstone’s B REIT and B CRED, leading to a surge in non-traded REITs, BDCs, and interval funds. These products have prioritized investor protections, controlled liquidity (often 5% of NAV per quarter), and clearer rules.
• Case Study—B REIT: In 2022-2023, B REIT experienced outsized redemptions, largely from leveraged Asian clients; the product’s design worked as intended, with defenses (liquidity sleeves, institutional investor partnerships) keeping things orderly.

  “I have not read any story of a widow orphan parent who suffered harm due to B REIT distributing assets as it always said it would...”
  — Josh Clarkson (13:13)

• Design Matters: Illiquidity is not a flaw if matched with product design and investor education.

Marketing & Brand—A New Era

• Regulatory Shift on Fund Marketing: Recent “506C” changes mean funds can more broadly promote new offerings, provided only accredited investors participate. This is transforming how funds build brand and media presence.

  “If you’re now able to talk about your fund when it launches, that’s a really low lift way to get some really positive narrative points out there in the market.”
  — Josh Clarkson (20:21)

• Brand Importance: Establishing credibility now involves not just having good performance but also public profile:

  “Media engagement… can pay huge dividends in terms of positive name recognition across a really broad audience.”
  — Josh Clarkson (19:45)

Vehicle & Strategy Fit

• Best-Fit Products: Most new access is focused on target-date funds for 401k plans, not standalone PE or credit picks. These structures blend private assets with predominantly liquid assets, ensuring liquidity needs are met.

• Credit and Real Estate Dominate: Yield-oriented products—private credit, direct lending, infrastructure, real estate—are natural initial fits due to income, lower volatility, and mechanical payout schedules.

  “Credit has been the strongest grower… makes the most sense for high net worth… looking for high current income.”
  — Josh Clarkson (21:42)

• Private Equity & Venture: Gaining momentum, especially among the ultra-high-net-worth, but with careful product design (fund-of-funds, qualified purchaser requirements) to avoid excessive risk.

Competitive Landscape—Who Wins?

• Bigger Gets Bigger: Scale, breadth, and brand are major differentiators. Major players (Blackstone, Apollo, Blue Owl, Ares) are best positioned to build distribution, manage regulatory requirements, and capture the lion’s share.

  “It will be the bigger, scaled firms, the Blue Owls, the Areses, the Apollos, the Blackstones of the world who have the breadth and scale to both offer top tier products across a range…”
  — Josh Clarkson (33:11)

• Specialist Roles: Niche players can succeed if they offer clear differentiation or complementary strategies, but will face more challenges with distribution and brand-building.

• Distribution Partnerships: Expect more collaboration between alternative managers and traditional asset managers (incumbents with strong 401k/distribution channels).

Fees, Performance, & Education

• Fees Are Higher: Running direct lending and private alts requires more staff, structuring, and legal work—so expect higher (but justified) fees relative to passive options.

  “Full stop. These are more expensive businesses to run.”
  — Josh Clarkson (41:31)

• Focus on Net Returns: More expensive, but historical performance for scaled, top-tier managers has justified these fees net of costs.

• Education Is Crucial: There’s a significant push by managers to educate advisors (via academies and CE content); as product complexity and choices grow, investor education remains paramount.

  “There is a lot of education to be done here… The advisors are I think for the foreseeable future going to be the conduit of much of that.”
  — Josh Clarkson (46:10)

• Regulatory/Educational Landscape: Regulators could play a bigger role in disclosure and education, but most of the burden currently falls to asset managers and advisors.

Notable Quotes & Memorable Moments

• On the $4T opportunity:

  “$4 trillion is a pretty big number. It's the GDP of Japan actually.”
  — Josh Clarkson (04:15)

• Are recent "failures" a canary in the coal mine?

  “Neither of these companies were PE owned and neither...primarily financed by private credit...this only makes the case stronger that...direct lending and private credit is a far better, far safer way...”
  — Josh Clarkson (07:25 - 08:22)

• On B REIT's stress test:

  “It really did exactly what it was supposed to do...You are trading liquidity for lower downside risk, potentially better returns, and that...needs to be viewed in the context of an entire portfolio.”
  — Josh Clarkson (12:58 - 15:44)

• On brand building for alternative managers:

  “Being an expert voice on relevant trends...can pay huge dividends in terms of positive name recognition across a really broad audience.”
  — Josh Clarkson (19:45)

• On the importance of education:

  “There is a lot of education to be done here...advisors need to get smart on it.”
  — Josh Clarkson (46:10)

Timeline of Important Segments

• Main Theme Introduction (02:34–04:15): Broad market opportunity, context for the episode
• Size of Opportunity & Institutional vs Retail Exposure (04:15–05:25)
• Recent Market Events and Risk Rebuttal (06:15–08:26)
• Regulatory Evolution & Background (08:56–10:21)
• Product History – Non-Traded REITs to Modern Semi-Liquid Offerings (10:32–12:35)
• Liquidity Lessons & Case Study: B REIT (12:58–16:18)
• Marketing and Media Changes (506C Rules) (17:24–20:45)
• Which Vehicles and Asset Classes Fit? (21:17–29:46)
• How Platforms & Products Will Evolve (29:46–32:58)
• Who Wins? Manager & Distribution Perspectives (32:58–39:36)
• Fees, Performance, and Disclosure/Education (40:53–47:23)
• Closing Reflections and Recap (48:56–51:11)

Summary Table: Winners & Losers

| Winner Category | Why They Win | |---------------------------------------|--------------------------------------------------------| | Large Alt Asset Managers (Blackstone, Apollo, etc.) | Scale, breadth, branding, ability to build distribution, product range | | Investors/Accredited Individuals | Access to better, diversified products (if educated) | | Advisors with strong education | Service differentiated access, command higher value | | Product Innovators (esp. in credit) | Meet demand for yield, structure for liquidity control |

| Loser Category | Why They Lose | |---------------------------------------|--------------------------------------------------------| | Small/specialist managers lacking scale| Can't compete on brand/distribution, resource constraints| | Investors with poor education | At risk of misunderstood products/inappropriate choices | | Traditional long-only shops | Structural headwinds, not equipped for new demand |

Final Takeaway

This episode offers a nuanced, expert-level overview of the rapidly changing world of alternative investing for individuals. The trend of “alts for all” is real, regulatory changes are accelerating access, and product innovation is thriving. Risks—including liquidity and complexity—are being managed with thoughtful product and process design, but ongoing education and brand trust will matter more than ever. The biggest alternative managers are set for significant growth, but sophisticated investors—properly educated—could be the ultimate winners.

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