Gallagher Of iCapital On Rising Interest, Issues With Alternatives
Advisor and investor interest in alternatives continues to increase even as various aspects of portfolio construction have evolved over the last year. In an interview, Gary Gallagher, who was named president of the alternatives platform in January, detailed how some of the changes taking place in that area of the investment world are playing out.
In a recent survey conducted by iCapital, 89% of advisors plan to “maintain or increase” allocations to alternatives, while 84% say client interest has increased or remained stable, the company said. As equity prices have continued a 15-year bull market, advisors and clients seeking diversification are finding places in their portfolios for various alternatives.
Advisors who were once cautious about allocating alternatives to client portfolios are no longer as reticent. “We are beginning to see mid-sized RIAs with between $400 million and $1 billion in assets showing a willingness to purchase alternatives,” says Gallagher, who had served in several positions at Fidelity over several decades, including as head of the strategic business development and president of Fidelity Institutional Wealth Advisor. “It’s no longer a question of if, it’s when and how.”
That presents a new set of challenges. “The questions are turning to adoption, implementation and scale,” said Gallagher.
“We’re seeing that shift across a number of areas,” he continued. “Fifty-nine percent of advisors cite challenges assessing liquidity and risk exposures across asset classes, while 53% point to compliance and regulatory concerns and 49% cite understanding how alternatives fit within overall portfolio construction. We’re also seeing growing demand for the technology and analytics needed to support implementation.”
At the same time, advisors are becoming more selective. The iCapital survey found that 37% of advisors expressed an interest in allocating assets to venture capital, up from 26% one year ago. “Venture categories are driving more interest as large [private] companies move towards IPOs,” said Gallagher, who is also credited with helping LPL Financial build out its RIA platform during a four-year stint at the independent broker-dealer.
Several large RIAs have made private investments in companies like Open AI and Anthropic, which are expected to go public either this year or in 2027. And the SpaceX IPO bonanza created a new wave of potential multi-millionaire clients for the advisory industry.
For most of the last decade, executives at iCapital have pointed to the way fundamental changes in the U.S. economy—the increasing role of private businesses—should force investors to reconsider how they allocate their investments. Moreover, start-up companies are opting to stay private for much longer time periods than they did three decades ago.
According to the survey, allocation intentions increased even as confidence and economic optimism softened, dropping from 74% to 61%. Private equity remained the asset class that captured the most interest within the alternatives universe, though interest fell marginally from 66% to 64%.
Real estate witnessed a rise in advisor interest from 44% to 50%, while other real assets climbed from 21% to 28%. Private credit, which has been in the headlines as a result of mounting concerns about loan quality, saw interest from advisors fall from 56% to 43%.
Although the survey said interest in hedge funds slid from 54% to 42%, another iCapital publication, Alternatives Decoded, appeared to contest that view. Alternatives Decoded claimed that hedge funds saw $116 billion of net inflows in 2025, the most since 2007.
Tax-aware, long-short separately managed accounts also have seen a surge of interest in recent years, as investor demand for vehicles that can help them defer or reduce large, unrealized capital gains rises in conjunction with the equity market.
