Financial advisors continue to embrace alternative investments, but the mix of assets they favor is undergoing a rapid transformation. According to a recent survey by ISS Market Intelligence, nearly half of U.S. advisors—48%—currently allocate client assets to alternatives, with wirehouse-affiliated advisors leading adoption across distribution channels. While overall enthusiasm for the asset class remains robust, the composition of demand has shifted decisively away from private credit, the strategy that dominated inflows for much of the past three years.
Private credit remains the most widely held alternative, with 60% of advisors reporting existing exposure. However, the forward-looking outlook has deteriorated sharply. Only 23% of advisors now plan to increase their private credit allocations over the next 12 months, down from 64% at the end of 2024, according to ISS Market Intelligence. In contrast, infrastructure is gaining momentum: 73% of advisors surveyed said they expect to raise their infrastructure allocations over the next year, up from 68% in 2024.
The divergence between these two strategies—once grouped together as core income-generating alternatives—signals that advisors are becoming more selective rather than retreating from the broader alts asset class. The cooling sentiment toward private credit reflects a series of negative headlines that have eroded advisor confidence. Bankruptcies among software-focused private borrowers, concerns about artificial intelligence's impact on private technology companies, and high-profile redemption pressures at several major funds have all contributed to a reassessment. Wealth managers are now stress-testing portfolios and closely monitoring leading indicators such as non-accruals and payment-in-kind utilization.
Redemption pressures have highlighted a structural tension that advisors have long acknowledged but rarely faced in practice: liquidity constraints in semi-liquid fund structures. When investors sought to withdraw capital from certain private credit vehicles earlier this year, redemption gates commonly used by interval funds and closed-end fund structures limited their ability to exit. When asked to identify the primary barriers to expanding alternatives usage, 65% of advisors cited illiquidity as one of their top three hurdles, and 51% ranked it as the single largest obstacle. Higher fees ranked second, cited by 47% of respondents as a significant barrier.
Despite these liquidity concerns, advisors still expressed a strong structural preference for semi-liquid vehicles. Thirty-nine percent said they prefer to access alternatives through interval funds, closed-end funds, and business development companies (BDCs), compared to 25% who favored traditional limited partnership structures. This appetite for semi-liquid exposure sits in tension with the fact that those structures have faced the most scrutiny. Alan Hess and Antara Maity, authors of the ISS Market Intelligence report, noted that developments in private credit have brought existing hurdles to the surface while intensifying advisors' focus on manager quality and downside protection.
The rotation in U.S. advisor sentiment echoes findings from a January survey of 390 global wealth professionals conducted by Hamilton Lane, a Philadelphia-based private markets investment firm, in partnership with Wakefield Research. That survey—covering respondents across the Americas, Asia, Europe, and the Middle East with a minimum of $150 million in assets under management—found that 86% of wealth professionals planned to increase client allocations to private market strategies this year. Private credit ranked last among strategies that advisors planned to grow, with just 36% of Hamilton Lane respondents saying they intended to raise credit allocations. Thirty-seven percent said they were actually planning to reduce them, making it the only strategy where more respondents planned to dial down rather than ramp up exposure. Infrastructure and venture capital drew among the highest levels of planned growth.
For advisors navigating this shifting landscape, the data underscores the importance of due diligence and manager selection. As private credit faces headwinds, infrastructure is emerging as a favored alternative, offering potential for stable returns and diversification. The broader trend toward alternatives remains intact, but the composition of portfolios is evolving rapidly. Advisors should consider how these changes align with client goals and risk tolerance, particularly given the persistent liquidity concerns highlighted by the survey.
Related reading: LP Appetite for Private Credit Drops to 29% as Zombie Fund Fears Rise: Coller Survey and Private Markets Hit $18 Trillion, Sparking CFA Institute Call for Regulatory Overhaul.
