Wall Street is witnessing the boom of a new generation of investors who no longer trust the traditional system, and clearly, they are no longer pouring capital into stocks and bonds.
Millennials and Gen Z, primarily under 43 years old and holding real cash flow, are shifting their assets towards cryptocurrency, real estate, pre-IPO startups, collectibles, and other alternative assets.
They have witnessed collapses, financial bailouts, and inflation eroding portfolios. Therefore, their money is flowing towards asset classes that traditional play cannot access.
According to Bloomberg, Bank of America reported that the number of individual clients holding alternative assets has doubled since 2020. This bank adds about 50 new alternative investment funds each year. A large BofA study last year found that 73% of wealthy investors under 43 do not believe that the traditional stock and bond model will make them wealthy. About 93% plan to increase their investment in alternative assets in the future.
Investment firms are creating retail versions of elite products.
This shift forces big names to restructure how they package investment products. Corporations like Blackstone and Apollo are launching ETFs along with illiquid funds, which were previously reserved for large institutions.
These funds are now being distributed through private banks and fintech applications. Forge Global Holdings has lowered the minimum investment threshold to $5,000, leading to a surge in daily registrations. Many new users seek investment opportunities first in companies like OpenAI before IPO.
These young investors view the 60/40 portfolio as ineffective. The 60% stock and 40% bond allocation model completely failed in 2022 as inflation drove both asset types down simultaneously.
Morgan Stanley recently filed to launch a diversified investment fund from private debt to real estate and infrastructure. A CAIS survey shows that 80% of alternative fund managers plan to launch new products for individual investors, nearly doubling from three years ago. Demand is growing rapidly, and Wall Street is adapting at breakneck speed.
High-risk products are increasingly attracting customers despite continuous warnings.
This new form of investment is not simple. Many products have high costs, complex structures, and poor liquidity. Blackstone's real estate investment fund had to limit withdrawals in 2022 after interest rates rose sharply.
Nevertheless, the money flow continues. JPMorgan strategists advise clients to reduce their exposure to private debt and equity as they continue to lag behind the public markets this year. An academic study labeled alternative assets as "expensive and wasteful," while Moody's warned that bringing individual investors into private markets creates serious systemic liquidity risks.
Despite those warnings, the allure remains undiminished. On TikTok and Reddit, the philosophy of quick wealth is spreading rapidly. This narrative is not exclusive to Gen Z or Millennials. Chad Blackburn, a 45-year-old accountant in Nashville, who has been investing in stocks since his teenage years, now mainly bets on Bitcoin and startups.
"The dot-com bubble and the great financial crisis forced me to think more deeply about how to invest," Chad shared. "Why should I limit myself to stocks and bonds when most aren't as diversified as people think?"
Real estate, cryptocurrency, and private equity are the top choices for this group. Psychological factors also play a significant role. Many believe that traditional markets are manipulated or too fragile. Owen Lamont, a portfolio manager at Acadian Asset Management, commented: "They feel that the system is against them. Something bold must be done to get rich."
The push from individual investors also reflects the fatigue of institutional clients. Pension funds, asset funds, and insurance companies have allocated about 20% of their portfolios to alternative assets, while individuals only account for 7%. This significant gap has Wall Street eagerly pursuing.
Chris Toomey, managing director at Morgan Stanley Private Wealth Management, analyzes the differences: older investors prefer infrastructure and stable returns, while younger groups prefer private equity. "They are at an early stage of the investment life cycle with a high risk tolerance. They are early investors with a long-term vision," Chris said.
However, not all young people are participating. Vanguard warns that thousands of Gen Z and millennials are still letting their money stagnate in default retirement accounts instead of diversifying their portfolios. For every person seeking alternative assets, there is another simply hoarding cash in money market funds.
Source: https://tintucbitcoin.com/gen-z-millennials-lam-moi-wall-street/
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