Core Viewpoint - The article discusses the increasing interest of financial institutions in promoting alternative assets to individual investors, highlighting the potential for significant asset growth and management fee income if they can expand beyond institutional investors [1][2]. Group 1: Characteristics of Alternative Assets - Alternative assets, including hedge funds, venture capital, private equity, non-traded real estate, private credit, and infrastructure, are generally considered high-risk and misleading, with high fees, lack of transparency, and low liquidity, making them unsuitable for average investors [2][3]. - Private equity, as an example of alternative investment, is often perceived as lower risk due to infrequent price updates, leading to a false sense of security among investors [3][4]. Group 2: Fees and Transparency - The management fees for alternative assets can be exorbitantly high, often exceeding 7%, compared to as low as 0.04% for ETFs, which can significantly erode net returns for investors [5][6]. - The complexity of calculating returns and fees in private equity can make it challenging for even professional investors to fully understand, let alone individual investors [6]. Group 3: Liquidity Issues - Unlike publicly traded ETFs, private equity and most alternative assets typically have long redemption lock-up periods, which can lead to liquidity challenges for individual investors [7]. - Many private equity funds allow monthly subscriptions but restrict redemptions, which can create "redemption congestion" during high demand periods, making these assets more suitable for institutional investors with stable cash flows [7][8]. Group 4: Performance Comparison - Even top-performing university endowment funds, which have access to elite alternative asset managers, have reported lower annualized median returns compared to simple, low-cost index ETFs, with a median return of 6.7% over the past decade compared to 12.8% for the S&P 500 [8]. - The current landscape shows that many institutional investors are facing redemption challenges with private equity holdings, indicating that individual investors may inadvertently take on illiquid assets that institutions are struggling to exit [8].

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