Wall Street touts outsourced allocation ploy in bid to market private funds to individuals

Wall Street touts outsourced allocation ploy in bid to market private funds to individuals

Alexander Davis

Thu, August 6, 2026 at 7:08 PM GMT+3 6 min read

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BlackRock CEO Larry Fink has extolled model portfolios as the path to increase allocations of alternatives in retail accounts.

Paul Morigi/Getty Images

Plumbing or packaging: Which of the two holds the key to making private market investment products better suited to the mass affluent?

When it comes to integrating private market alternatives into public markets, plumbing is industry shorthand for an ever-evolving revamp of the distribution pipelines and fintech infrastructure underlying how private fund managers do business with a prized market segment: wealth advisers and their retail clients.

But at the same time, the financial industry has also been innovating in how to package products: that is, coming up with retail-friendly wrappers for fund structures and other products that were originally built to serve big institutions, not wealthy individuals.

Marc Rowan, CEO of Apollo Global Management, said on Tuesday that rather than wait for public-market investors to come willingly to private alternatives, "we are going to need to go to them."

"They have grown up as public market investors," Rowan said on the company's second-quarter earnings call with analysts. "The more that we can bring the origination from the private markets, but the packaging that they expect, the more I believe we will grow the asset class, and we will be more accepted and have greater sources of demand for our product."

To hit that goal, Apollo and other fund managers are increasingly working to woo wealth advisers by designing off-the-shelf "model" portfolios that contain pre-set sleeves for public stocks and bonds, alongside private ones.

Model portfolios began with public-market assets, and their main holdings consist of publicly traded mutual funds and ETFs. But in the past year, asset managers from BlackRock to Fidelity Investments and Franklin Templeton have devised a new crop of model portfolios, partly filled with alts, as a simplified way to help advisers offer exposure to private credit, private equity and other alternative investments—all in a single customer account.

Through model portfolios, wealth managers are outsourcing investment advice on their clients' asset allocations. A small but growing number of them have begun to incorporate semiliquid funds designed by giant managers like BlackRock and KKR.

From 60/40 to 50/30/20

BlackRock CEO Larry Fink has extolled model portfolios as the path to shift asset allocations from the traditional 60/40 stocks-and-bonds mix to a 50/30 approach that allocates 20% to alternatives. Lawrence Calcano, CEO of iCapital, which runs the biggest adviser-facing platform for alternative investments, sees model portfolios as a central growth driver. And their scale suggests great potential: Roughly three-quarters of wealth managers use model portfolios today.

More than $943 billion in assets sit in US-based model portfolios, according to Morningstar's latest research. That only covers third-party models marketed to registered investment advisers. Add in the portion from broker-dealers and wirehouses, which reserve their proprietary models for their own clients, and the assets swell well into the trillions of dollars.

Although many firms say these structures are brimming with potential for increasing exposure to alts, the concept has had a modest start.

"I think the jury is still out on how popular models with private assets are going to be," said Morningstar analyst Stephen Margaria. "The anticipation is more of slow rollout than the inevitability that every adviser offering model portfolios is going to have some piece of private assets in there."

It's unclear how many of the assets in models have been allocated to private funds. Twenty different providers surveyed by Morningstar are currently including alternatives, with target allocations ranging from 5% to 10% and, in some cases, from 10% to 20%.

Ceding decision-making

What's more clear is that model portfolios are an increasingly important part of wealth managers' practice. Advisers aren't just buying products for their clients anymore, especially when it comes to private investments. They're ceding allocation decisions to model strategists such as BlackRock and Capital Group, who together own 43% market share.

A shift from fund-picking to model-picking is ushering in a change in who controls the advice layer.

Models range from preset, turnkey allocations to customized portfolios that advisers can tailor to an individual client's specifications.

(In June, the wealth advisory arm of Morningstar, the parent company of PitchBook, said it intended to develop model portfolios that included private market allocations. They will incorporate public and private strategies in collaboration with Apollo, JPMorgan Asset Management and Franklin Templeton.)

CAIS, iCapital's main marketplace competitor, offers more than 100 models created by third-party asset managers, home offices of RIAs and its own team of advisers.

"Among advisers newer to alternatives who engaged with models, the vast majority go on to invest across two or more products, average product usage nearly doubles, and asset class diversification increases as well," a CAIS spokesperson said in a written statement.

Education shortcut

Moving advisers into model portfolios is something of a shortcut to get around the RIA community's sluggish education on alternatives. A Morningstar survey earlier this year found that 40% of advisers are either not very familiar or not familiar at all with semiliquid funds.

"If there's broad adoption, it would absolutely drive flows into private assets," Morningstar's Margaria said. "We see this especially with the bigger model providers like BlackRock or Capital Group."

In 2025, BlackRock models scored over $24 billion of net inflows, more than half of the industry's total net flows, Morningstar found.

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Ultimately, the alts industry's endgame depends on more than just things like packaging or wrappers. Friction in the legacy infrastructure persists, leading many players to focus on the plumbing problem.

Large-scale adoption of paperwork-heavy evergreen funds may never appear in model portfolios unless the industry fully digitizes the manual onboarding and post-trade workflows that make the products so burdensome for advisers.

"That's why they haven't actually gotten real adoption," said Ben Haber, co-founder and CEO of Monark Markets, a developer of back-office fintech solutions for alternatives.

Haber is urging the alts industry to streamline its use of evergreen funds in model workflows by getting custodians and transfer agents to consolidate transactions through so–called omnibus sub-accounts. His template is based on a longstanding practice that has allowed public mutual funds and equities trading to grow at scale.

That type of fintech innovation may move the alts industry closer to its vision of getting quirky private-market products to meet wealth investors where they are.

"Advisers aren't going to ask, 'Can we trade these funds in omnibus?'," Haber said. "They're never going to know about that. They're going to say, 'Hey, can you give us an easy button to trade public and private models?' "

This article originally appeared on PitchBook News