Trillion-dollar firm sees a gap in alternatives for high net worth clients
The world’s largest alternative asset manager has officially opened its Toronto office. With a dedicated staff of 10, that the firm aims to expand its presence in Canada, with a particular focus on high net worth clients, distributing alternative asset strategies to the high net worth client segment.
Brad Marshall Blackstone’s Global Head of Private Credit Strategies explained that Canada is already the 3rd largest market for Blackstone. The firm is making a renewed push in Canada because they see Canadian high net worth clients facing the same issues their counterparts in the US have faced.
“Alternatives are still a very small part of their overall portfolio construction,” Marshall says. “We’ve lived in this world where the 60/40 portfolio allocation has come under a little bit of pressure because it hasn’t necessarily delivered the results that investors have been looking for. Alternatives have become a bigger part of most registered investment advisors’ playbook. We see our products and our ability to communicate and distribute those products to the high net worth channel in both the US and Canada as driving that push.”
Blackstone’s product set revolves around three pillars: private equity, private real estate, and private credit. Marshall explained that the firm intends to bring new products to market across their three pillars that are structured for high net worth individuals.
Education is a key part of Blackstone’s Canadian push. The relatively small team based in Canada will be backed up by a wider team of between 250 and 300 people working exclusively on the private wealth side of Blackstone. Much of that manpower is dedicated to educating advisors and their clients about alternatives.
In late October, Marshall noted, Blackstone will be hosting their first “BXU” or Blackstone University in Canada. The firm’s flagship education program invites advisors to connect directly with business leaders and portfolio managers. Mashall believes that giving advisors better access to education on alternatives can help them guide their high net worth clients through a potentially challenging economic period.
“I think we’re headed for shaky times,” Marshall says, “But what we see in the portfolio is somewhat more positive across Blackstone. But if advisors are concerned, or their clients are concerned, you should be as defensive as possible. You should not be in equities, you should not be in unsecured fixed income You should be in senior secured, arguably private debt. I think that message has started to resonate, where I can both get a return and I’m moving into a defensive asset class.”
While many advisors have expanded their alternatives offerings in recent years due to low yields from fixed income, Marshall still sees a place for private credit, especially for clients who expect a higher return. He notes that while 4% or 5% yields on treasuries or cash might look attractive relative to past years, advisors aren’t there to solve for 4%, it’s their job to solve for 9% or higher and private credit can help advisors achieve that in difficult periods.
By offering a Canadian team based in Toronto, Marshall explained that Blackstone will be more available to advisors and offer resources that can help high net worth clients. He believes Canadian advisors looking to solve for higher returns and client concerns should be watching what his firm is doing now.
“Advisors should be paying attention to the fact that in Canada and the US, alternatives are becoming a bigger piece of clients’ overall portfolio allocations,” Marshall says. “We’re going to continue to bring [alternative] products to market, we’re going to continue to educate advisors and we’re going to help them get comfortable with the idea that alts are part of prudent portfolio construction and the best way to serve their clients.”