Millennials have a greater appetite for alternative investments than older generations, according to Goldman Sachs research.
Goldman’s Opening the Door to Alternatives report, which surveyed 1,000 HNW and UHNW investors in the US on their asset allocations, found that Millennials allocate roughly 20 per cent of their portfolios to alternatives – significantly higher than Gen X (11 per cent) and Baby Boomers (6 per cent).
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With Millennials viewing public equities as riskier – they have around 27 per cent of their assets allocated to public equities, compared with the 43 per cent average across all generations surveyed – alternatives present an opportunity to access high-growth industries and enhance returns, the report said. This generation is also more comfortable with alternative asset classes than their older counterparts.
‘Alternatives’ encompasses a wide range of investable assets, including private equity, private credit, real estate, commodities and even collectible items such as wine and art. Millennial investors are especially drawn to innovative investments, such as those in the technology sector, the report added.
‘Many of the most compelling investment themes making headlines are unfolding within private markets, including breakthroughs in healthcare and technology,’ said Kyle Kniffen, global head of alternatives for third-party wealth at Goldman Sachs. ‘We see opportunities in growth equity and venture capital to invest in rapidly expanding companies at the forefront of innovation.’
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Born between 1981 and 1996, Millennials are considered to be the first generation to have grown up with the internet, and whose late teens and early adult years were defined by the 2008 financial crash. Most of their parents are Baby Boomers: born between 1946 and 1964, their post-World War Two era was defined by social change and rising birth rates. Sandwiched between these two generations is Gen X, which witnessed the rise of the internet during their early adulthood and are considered by some to be self-reliant.
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Millennials’ motivation for investing in alternatives also differs from those older than them. While 48 per cent of Gen X and 53 per cent of Boomers cited diversification as their primary reason for investing in alternatives, only 27 per cent of Millennials named this as a priority. Instead, the unique opportunities alternatives can present, from growth potential to exposure to new industries, was top of the list for Millennials.
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