The glaring obstacle preventing private investments from quintupling assets in eight years -- wealthy investors who can hardly name a single provider's brand

Ask most investors about "alternative investments" brand names and chances are you’ll be met with an uncomfortable silence. 

Wildly optimistic projections estimate the category growing at double the rate of public markets and reaching $60 trillion to 65 trillion (up from, maybe, $13 trillion) by 2032. Yet, awareness about the whom, what, and why of ‘private’ investments is near nil.

When pressed for alternative investment firm brands in a recent Bain & Co. survey, investors responded with
Fidelity, Vanguard, and Charles Schwab – not BlackRock, Ares, or Apollo.

Having hundreds of billions under management doesn’t buy you brand recognition.

The problem here is a private markets blind spot; neglect is part of the story, but also the Securities and Exchange Commission (SEC) plays a convenient scapegoat. SEC Rule 506(b) says that advertising alternative investment funds is strictly prohibited. 

What’s left is a conversation between the GP and advisor that has become a two-legged stool. It leaves out the individuals who are being asked to put actual skin in the game.

Stumbling blocks

Yes, investors trust advisors, but it still creates a real disconnect. Imagine being a car manufacturer and only being permitted to promote your product to car dealers. 

Now imagine you’re selling something far more esoteric than a car.

Financial advisors are expected to sell an unfamiliar asset class with higher minimums, higher fees, and opaque reporting.

 The customer will also probably be required to hold the investment for a decade or more, making it all but illiquid.

All from companies their customers don't know.

Those liquidity concerns alone are a huge stumbling block since only a mere 2.3% of assets controlled by US financial advisors were invested in illiquid alternatives last year, Cerulli Associates reports. 

For advisors, that’s a heavy lift to overcome at the point of sale.

Yes, asset managers are waking up – or at least that's the exception to prove the rule of no-alts-branding.

Doing a solid

Earlier this year, the world’s largest private asset manager, Blackstone, launched a 30-second commercial reminiscent
of Pixar’s “Finding Nemo.”  A goldfish makes the transition from swimming in a small fishbowl to roaming free in a vast ocean. 

Using music and type, the commercial artfully makes the case that 90% of all companies are private, arguing alternatives expose investors to a far greater sea of opportunities. It concludes with a mission-driven tagline commanding all stakeholders to “Build with Blackstone.”

The investor also might have concluded that Blackstone just exposed them to Great White Sharks – but Blackstone did a solid for the $13 trillion alternatives industry.

Yes, Blackstone – with more assets under management than the next three largest managers combined – is taking the route of selling brand to get past the need to educate about complexities. But that's branding.

Brands equal value

No doubt some private market mavens will dismiss marketing as fluff. The plea leaves out … alpha, while undermining the cachet of a playground once exclusively used for ultra-high-net-worth investors. 

If brands didn’t matter, though, private equity firms wouldn’t be rushing to form “value creation teams” today. 

It is the ultimate irony that an industry that buys and sells the world’s great brands has invested so little in its own. Brands equal value creation and trust. It’s that simple … and that hard.

Accreting benefits

Today, there are more than 2,000 asset managers in a category where due-diligence factors like track record, operations, risk management, and research capabilities are table stakes. Now more than ever, there’s a real need to stand out. It’s a branding imperative.

For some, there is even low-hanging fruit. 

For example, select asset managers have helped double the size of the industry over the past decade by creating ingenious new asset classes for fundraising in unexpected areas like sports franchises and litigation finance. 

Achievements like these should accrete benefits not just to the industry, but to an actual accountable brand. The credit belongs to the inventive teams that forged the way. 

These are the stories that become proof points to a great brand.

In possibly the near future, when asset managers can legally sell funds directly to investors, the potential seems as vast as that ocean.

Douglas Kim is an advertising copywriter and creative director in New York who has spent his career working with large financial firms in both public and private markets.