Key Takeaways
- • Cliffwater, a California-based alternative investment advisory firm, is pivoting toward retail and wealth channels, offering private debt and private equity funds to wealth management clients, with roughly $40 billion managed through the RIA channel.
- • CEO Stephen Nesbitt told Institutional Investor the institutional market "is flatlined," and Cliffwater began shifting to retail about five years ago due to stagnant growth.
- • Cerulli Associates data shows the retail direct channel has grown 10 percentage points since 2016, while wirehouses have lost four points of market share and are expected to lose another four by year-end 2027.
- • Fee pressure, limited alpha generation, the shift to passive strategies, and a slowing institutional market have compressed margins for non-discretionary consultants.
- • Consultants are pursuing OCIO or wealth-manager partnerships, as NEPC did when it merged with Hightower last year; NEPC's OCIO business now accounts for 30 percent of its revenue.
Summary
Cliffwater, the California-based alternative investment advisory firm, is redirecting its business toward the retail and wealth management market as institutional opportunities contract. According to Institutional Investor, the firm offers private debt and private equity funds to wealth management clients and currently manages roughly $40 billion through the RIA channel. Cliffwater's CEO Stephen Nesbitt told the publication in May that "the institutional market is flatlined." The firm began pivoting to retail about five years ago because of stagnant growth rates.
The article describes a difficult environment for non-discretionary investment consultants. Fee pressure, the lack of alpha generation, the move to passive investing, and a weak institutional market have all reduced margins and revenues. Nesbitt joked that "there are easier ways to make money than being an institutional consultant."
Data from Cerulli Associates shows the U.S. retail direct channel has grown 10 percentage points since 2016, outpacing institutional client segments. Wirehouses have lost four percentage points of market share since 2016 and are expected to lose another four by year-end 2027. Michele Giuditta, a director in Cerulli's institutional practice, attributed the trend partly to the decline of corporate pension plans, which are freezing and moving assets into intermediated IRAs, producing "both shrinking institutional assets under management combined with increased competition within the OCIO space."
Consultants have several options for evolving, including moving into OCIO or partnering with an established wealth manager. NEPC took the latter route when it merged with Hightower last year. NEPC chief investment officer Tim McCusker told Institutional Investor in September that "everything except private markets has had a really tough time." He said OCIO has been NEPC's main growth engine over the past decade, rising from zero 13 years ago to 30 percent of revenue, and that it will continue to grow. McCusker argued that allocators have largely established their private market allocations, leaving institutional growth dependent on replacement flows, and that many managers now view the wealth market as a place to serve and bring advice.
The article describes a difficult environment for non-discretionary investment consultants. Fee pressure, the lack of alpha generation, the move to passive investing, and a weak institutional market have all reduced margins and revenues. Nesbitt joked that "there are easier ways to make money than being an institutional consultant."
Data from Cerulli Associates shows the U.S. retail direct channel has grown 10 percentage points since 2016, outpacing institutional client segments. Wirehouses have lost four percentage points of market share since 2016 and are expected to lose another four by year-end 2027. Michele Giuditta, a director in Cerulli's institutional practice, attributed the trend partly to the decline of corporate pension plans, which are freezing and moving assets into intermediated IRAs, producing "both shrinking institutional assets under management combined with increased competition within the OCIO space."
Consultants have several options for evolving, including moving into OCIO or partnering with an established wealth manager. NEPC took the latter route when it merged with Hightower last year. NEPC chief investment officer Tim McCusker told Institutional Investor in September that "everything except private markets has had a really tough time." He said OCIO has been NEPC's main growth engine over the past decade, rising from zero 13 years ago to 30 percent of revenue, and that it will continue to grow. McCusker argued that allocators have largely established their private market allocations, leaving institutional growth dependent on replacement flows, and that many managers now view the wealth market as a place to serve and bring advice.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.