Blackstone says alternative assets are headed for your 401(k)

The creation of liquidity in certain alternative products aimed at retail investors has broadened their appeal.

Alternative assets will eventually find their way into 401(k) plans, predicted Joan Solotar, global head of private wealth solutions at Blackstone Inc.

“The premise of saving for 10, 20, 30, 40 years and only having access to daily liquidity products doesn’t make sense,” said Solotar, speaking Thursday at the Bloomberg Wealth Summit in New York. “It’s a mismatch.”

Blackstone, the world’s largest private equity firm, has spent a decade ramping up efforts to attract wealthy individuals worldwide as it looks to leverage its track record of investing for institutional clients and boost allocations to its funds by private banks, family offices and wealth managers. Solotar’s unit has spearheaded that effort.

Alternative assets like real estate, private debt and private equity are seen as a way to diversify and earn returns uncorrelated with traditional financial markets. They were once the sole purview of large institutional investors who don’t need assets to be particularly liquid, but the creation of liquidity in certain alternative products aimed at retail investors has broadened their appeal.

“The alternative investments that are now accessible are what we call semiliquid — there is quarterly liquidity — and that has changed what’s happening in the alts business,” said Solotar. “That’s been the big defining moment upon which advisers have really started to embrace alternatives.”

Solotar sees huge potential, and expects more alts to become available over electronic trading platforms, just like stocks and bonds are currently.

“We have so much room to run,” and assets in the retail channel at Blackstone could eventually grow to $500 billion from $200 billion currently, she said. “We are talking about global wealth markets that are trillions and trillions of dollars.”