Fenrir Research · Asset Manager Pivot · Part II of IV
Asset Manager Pivot: The Pie Expands
How new product architecture and fresh fee pools are forming at both ends of the barbell.
“Idioteque” opens with an ice age arriving — not as a forecast, but as the present condition. The barbell is not coming; both ends already exist as live categories.
Part III · Product Innovation: The Barbell Forms
Idioteque opens with the line about an ice age coming — not as forecast but as the present condition. Parts I and II established the forces driving the structural shift. Part III is where the new product architecture is already visible.
Radiohead · Idioteque · Kid A (2000)
The barbell is not a forecast. Both ends already exist as live product categories with measurable AUM, growing flows, and identified manager winners. What is changing is which end captures the marginal allocation and at what pace. This Part walks the structure of each end — the passive core and the alternatives satellites — and the economics that determine which managers prosper on each side.
The passive core: cheaper, smarter, more personalised
The passive end of the barbell is not just index ETFs at five basis points. It has evolved into a layered product stack that delivers different forms of beta with different degrees of customisation, while keeping the cost structure low enough that no active manager can compete on price. The most consequential innovation in the last decade is not the index ETF itself but the products built around the index ETF concept that extract additional value from a passive framework. Four product families define this stack today.
Index ETFs — the floor
The floor of the passive stack. Broad-market index ETFs from Vanguard, BlackRock iShares, State Street SPDR, and Schwab now charge between 3 and 10 basis points for total-market or S&P 500 exposure. The 2025 Vanguard fee cut across 87 funds returning $350 million annually to investors is the most visible recent reinforcement of the race to zero. Among the largest issuers, the two leaders control 31% and 27% of total ETF AUM respectively, and the top four issuers hold 80% of the ETF market. Scale matters here in a way that does not exist in traditional active management — an index ETF at $300 billion AUM is meaningfully cheaper to run per dollar than the same product at $30 billion, and the cost savings can be passed to investors as fee cuts that further accelerate AUM gains. This is the flywheel that makes index ETFs structurally durable as a product category.
Direct indexing — the personalisation layer
Direct indexing is the most underappreciated passive innovation of the past five years. Rather than purchasing a fund that tracks an index, investors purchase the underlying constituents of an index directly inside a separately managed account, and the manager runs the portfolio against the benchmark with the ability to harvest tax losses on individual positions, screen out names for ESG or values reasons, transition appreciated stock without immediate gain realisation, and tilt exposures based on client preference. Cerulli reports direct indexing AUM closed 2024 at $864 billion, nearly double the 2021 level, and projected to cross $1 trillion in 2025. Cerulli’s forecast has adoption of direct indexing outpacing ETFs, traditional SMAs, and mutual funds over the next five years at a 12.1% annual growth rate — the fastest-growing passive product format in the industry.
Direct indexing is structurally consequential because it solves the single biggest objection to passive investing for taxable wealth clients: that index funds cannot deliver tax alpha. A direct-indexed portfolio can systematically realise losses on individual constituents while the headline index is up, generating a stream of capital losses that offset gains elsewhere in the client’s portfolio. For high-tax investors, the after-tax return on a direct-indexed S&P 500 portfolio can exceed the after-tax return on an S&P 500 ETF by 75–150 basis points annually depending on market volatility — a real advantage that justifies a 25–40 basis point management fee. Market share is concentrated: the top five providers — Morgan Stanley/Parametric, Goldman Sachs Asset Management, Northern Trust, BlackRock/Aperio, and Fidelity — control 87% of direct indexing AUM. Morgan Stanley’s Parametric platform alone has been growing assets at 50%+ year-over-year since the Eaton Vance acquisition closed.
Quant-enhanced, factor, and systematic ETFs
The middle of the passive stack. Factor ETFs (value, momentum, quality, low volatility, dividend), smart-beta strategies, and systematic active ETFs occupy the space between pure index tracking and traditional active management. Pricing typically runs 15–40 basis points — expensive relative to broad-market ETFs, but cheap relative to traditional active mutual funds. The category is dominated by BlackRock, Dimensional Fund Advisors, Invesco, and AQR-style systematic shops. From an industry-structure perspective, this category is the natural migration path for assets currently sitting in traditional active mutual funds that are too closet-indexed to justify their fees. As DFA and similar shops have demonstrated, a systematic factor approach can deliver most of the value-add that active stock-pickers claim to deliver, with lower fees, better tax efficiency through the ETF wrapper, and higher capacity.
Thematic ETFs
The most distribution-driven part of the passive stack. Thematic ETFs (AI, cybersecurity, clean energy, robotics, blockchain, defence) sit at the intersection of passive product structure and active narrative. They are technically passive — they track a defined index — but they are sold and bought as expressions of a thematic view rather than as broad beta exposure. The category is structurally well-suited to the social-media-driven information ecosystem that younger investors operate in, because each thematic ETF maps to a narrative that can travel virally. ARK Invest is the canonical case study, but the more durable winners are the larger issuers (BlackRock iShares, Invesco, Global X) who can launch thematic products quickly and scale them through wirehouse distribution. Pricing on thematic ETFs is materially above broad-market index ETFs — typically 40–75 basis points — which makes them a margin-protective product category for issuers facing fee compression elsewhere.
| Passive Product Layer | Typical Fee Range | AUM | Market Structure |
|---|---|---|---|
| Index ETFs (broad market) | 3–10 bps | $10T+ | Top 4 control 80%; race to zero |
| Direct Indexing | 15–40 bps | ~$1T (2025E) | Top 5 control 87%; tax alpha edge |
| Factor / Smart Beta ETFs | 15–40 bps | ~$1.5T | BlackRock/DFA-led; systematic capture |
| Active ETFs (wrapper-converted) | 30–75 bps | $1.47T | 11% of ETFs but 80% of new launches |
| Thematic ETFs | 40–75 bps | ~$200B+ | Narrative-driven; distribution-led |
Sources: ICI Fact Book 2025; Cerulli direct indexing report 2025; Morningstar; TD Securities U.S. ETF Recap 2025. Fenrir Research compilation.
The alternatives end: democratised access, evergreen vehicles, tokenisation
The right side of the barbell is undergoing a more dramatic architectural reinvention than the left. For four decades, alternative investments were structured as closed-end drawdown funds with 8–10 year lockups, $5–10 million minimum commitments, capital calls drawn down over multi-year deployment periods, and access restricted to qualified institutional and ultra-high-net-worth clients. That structure is now being parallel-engineered into an entirely different product format designed for the private wealth and retail-adjacent channels. The result is a new generation of access vehicles — evergreen funds, interval funds, non-traded BDCs and REITs, ELTIFs and LTAFs in Europe, and tokenised funds — that together represent the most consequential product innovation in alternatives since the LP/GP fund structure itself.
Evergreen / semi-liquid funds — the new default access vehicle
Evergreen funds are the structural centre of the new alternatives architecture. Unlike traditional drawdown funds, they accept and redeem capital on a periodic basis (typically quarterly or semi-annually) at NAV, deploy capital immediately rather than over a multi-year drawdown, and offer no defined termination date. From a wealth distribution standpoint, this transforms the buying experience: a financial advisor can subscribe a client into an evergreen private equity fund in a single transaction, deploy 100% of the commitment immediately, and offer the client periodic redemption windows — all without the operational complexity of capital calls, distributions, and J-curve management that institutional LPs accept.
The growth metrics are unambiguous. PitchBook projects private evergreen fund AUM to grow from $2.7 trillion in 2024 to $4.4 trillion in 2029 — a 10%+ annual growth rate that outpaces traditional drawdown funds. Evergreen funds accounted for 14% of total private capital AUM in 2024 and are expected to reach 18% by 2029. Inside the equity-focused segment, the acceleration is even more dramatic: HSBC Asset Management’s analysis of the 16 largest SEC-registered private-equity-focused evergreen funds shows assets grew from $10 billion at end-2021 to $61 billion at end-2025 — a more than sixfold increase, with 68% growth in 2025 alone. Morningstar’s broader semi-liquid fund definition (including interval funds, tender offer funds, non-traded REITs, non-traded BDCs, and similar vehicles) reports the category crossed $530 billion at year-end 2025, up more than $100 billion from 2024. The XAI year-end 2025 market update separately tracks 158 interval funds with $156 billion in managed assets and 150 tender offer funds with another $120 billion — 67 new funds launched in 2025, up from 50 in 2024, with 13 new fund sponsors entering the market including Blue Owl, Coatue, and Adams Street.
$2.7T
Evergreen Fund AUM 2024
$4.4T
Forecast AUM 2029
6x
PE Evergreen Growth ’21–’25
68%
PE Evergreen Growth in 2025
Business Development Companies (BDCs) — the private credit access engine
Non-traded BDCs are the dominant access vehicle for private credit allocation by retail and HNW investors. BDCs are SEC-registered investment companies that hold portfolios of middle-market loans and earn current yield that is distributed to shareholders. Blackstone’s BCRED — the flagship retail-facing private credit fund — held $82.7 billion in investments by early 2026 and has delivered a 9.8% annualised return since inception. Yields on the BDC sector range from 10% to 12% in the current environment, with current income making them particularly attractive to HNW investors seeking yield in the absence of attractive fixed income alternatives. Fitch Ratings reported $11.7 billion in BDC issuance through June 2025 even as the broader private credit fundraising environment slowed. Apollo, Ares, Blackstone, KKR, and Owl Rock (Blue Owl) are the dominant sponsors. The BDC category has become the most efficient distribution channel between institutional private credit origination and the retail demand pool — and its growth is the single best leading indicator of the broader retail democratisation of private markets.
Tokenisation — the next architectural layer
Tokenisation of private market funds is the emerging frontier and warrants identification even though AUM remains small relative to traditional access vehicles. The most visible example is BlackRock’s BUIDL fund, a tokenised money market fund deployed on Ethereum that crossed $2 billion in AUM in early 2025. Franklin Templeton, Ondo Finance, and Hamilton Lane have all launched tokenised private market access products. The structural logic is that tokenisation can deliver three things the current evergreen architecture cannot: 24/7 secondary market liquidity (via on-chain transfer), fractional ownership at much lower minimums (as low as $1,000 vs. $25,000+ for typical interval funds), and programmable compliance via smart contracts. For the Fenrir Research view, tokenisation is not yet investable as an alternative-access category at scale, but the architectural direction is clear: the institutional drawdown fund will continue to be the dominant vehicle for institutional LPs, while tokenised evergreen products will progressively absorb retail allocation as regulatory frameworks mature.
Larry Fink’s 50/30/20
In his March 2025 BlackRock shareholder letter, Larry Fink advocated explicitly for a new standard portfolio of 50% equities, 30% fixed income, and 20% alternatives — replacing the traditional 60/40. This is the most consequential institutional endorsement of the barbell thesis from the world’s largest asset manager. BlackRock’s own product roadmap — the GIP infrastructure acquisition, the Preqin acquisition, the iShares private market access products in development — is explicitly aligned to the 50/30/20 architecture. When the largest passive manager in the world publicly redefines the default allocation template to include 20% alternatives, the migration accelerates structurally rather than gradually.
Part IV · The Alternatives Pie Expanding
The product architecture in Part III answers how capital is moving into alternatives. Part IV addresses the size of the destination and the manager economics that determine who captures the flow. The headline figures are large enough to be worth stating upfront: Preqin’s October 2025 Private Markets in 2030 report — the first published under BlackRock ownership — projects global alternatives AUM to reach $32 trillion by 2030, up from $16.8 trillion at end-2023. That is a near-doubling in seven years, against the backdrop of a slowdown in private equity fundraising and a flat-to-down hedge fund category. The growth is asymmetric: private credit and infrastructure are the engines.
Where the $32 trillion sits in 2030
| Alternative Asset Class | 2023 AUM | 2030F AUM | CAGR | Key Driver |
|---|---|---|---|---|
| Private Equity | $5.8T | $12.0T+ | ~12% | Take-privates, fewer public listings |
| Private Credit | $1.5T | $4.5T | ~14% | Bank disintermediation, retail access |
| Real Estate | $1.6T | $2.7T | ~7% | Cycle recovery, value-add IRRs |
| Infrastructure | $1.3T | ~$3.0T | ~13% | Energy transition, AI/data centres |
| Hedge Funds | $4.5T | $5.7T | ~4% | Lowest-growth alts category |
| Venture Capital | ~$2.1T | ~$3.5T | ~8% | AI capital intensity |
| Secondaries | ~$0.5T | ~$1.2T | ~13% | LP liquidity demand |
| Total | $16.8T | ~$32T | ~10% | — |
Sources: Preqin Private Markets in 2030 Report (October 2025); Preqin Future of Alternatives 2029. Categories may overlap (e.g. infrastructure debt sits inside private credit definitions). Fenrir Research consolidation.
Two observations on the category mix deserve emphasis before walking through the manager landscape. First, the growth is not evenly distributed. Private credit, infrastructure, and secondaries are growing at low double-digit rates; private equity is growing at a still-substantial rate but materially below its prior decade; hedge funds are barely growing at all. The relative shift inside alternatives matters as much as the headline growth — managers concentrated in the slower-growth categories will see AUM share decline even as their absolute AUM rises. Second, infrastructure is on the verge of becoming the third-largest alternative asset class by 2030, behind only private equity and hedge funds and ahead of real estate. That category re-ranking is the structural justification for treating infrastructure as the flagship Part V section of this report.
The manager landscape: consolidation at the top
The alternatives industry is structurally more concentrated than traditional asset management at its peak, and the concentration is intensifying. Five firms — Blackstone, Brookfield, Apollo, KKR, and Carlyle — together manage close to $5 trillion of the $20+ trillion currently in alternatives. Each is pursuing a similar strategic playbook with slightly different emphasis: build out private credit (the highest-growth category), integrate insurance balance sheets to provide permanent capital, expand into retail and HNW distribution through evergreen products, and consolidate adjacent specialist managers via M&A.
| Manager | AUM (latest) | Anchor Strategy | Distinguishing Feature |
|---|---|---|---|
| Blackstone | ~$1.3T | RE + Credit + PE | BCRED retail flagship; 33% credit&insurance mix |
| Brookfield | ~$1.0T | Infra + RE + Renewables | Crossed $1T in 2025; infra leader globally |
| Apollo | ~$785B–938B | Credit-led (IG + sponsor) | Athene captive insurer; 82% credit; $1.5T by ’29 target |
| KKR | ~$700B | PE + Credit + Infra | K-series wealth platform: $3B→$14B in 1 year |
| Carlyle | ~$452B | PE + Credit + Solutions | 2025 pivot to private wealth distribution |
| Ares | ~$543B | Credit (direct lending) | 72% private credit; non-insurance focused |
| BlackRock (alts) | ~$600B+ alts | Infra (GIP) + Credit (HPS) | Acquired GIP & Preqin; building alts-at-scale platform |
Sources: Company disclosures and earnings releases through Q3 2025. S&P Market Intelligence November 2025. Fenrir Research compilation.
The insurance balance sheet integration — the most consequential strategic move
The defining strategic move of the alternatives industry over the past five years has been the integration of insurance balance sheets with private credit platforms. Apollo’s full acquisition of Athene completed in 2022 set the template — an insurance company holds long-duration liabilities (annuities, structured settlements) that match well against long-duration private credit assets, and the asset manager parent earns a spread on the asset side plus management fees plus origination fees. The result is permanent capital that does not need to be raised in periodic fundraising cycles, immune to the LP commitment slowdowns that have plagued the closed-end fund industry since 2022.
Apollo is the cleanest expression of the model: private credit now represents approximately 82% of Apollo’s $785–938 billion AUM, with much of that credit funded by Athene insurance liabilities rather than external LP commitments. KKR (via Global Atlantic), Carlyle (via Fortitude Re), and Blackstone (via partnerships with Corebridge, AIG retirement, and others) have built similar though structurally distinct insurance integrations. BlackRock’s 2024 Global Insurance Report found that 91% of surveyed insurers plan to increase private asset allocation in 2025 and 2026 — the demand pull from the insurance industry alone is sufficient to drive material AUM growth at the insurance-aligned managers for the remainder of the decade. The fee economics on insurance-aligned AUM are lower per dollar than traditional LP AUM but the dollar volumes are large enough and the AUM is permanent enough that the model is structurally superior to traditional drawdown fundraising.
Private credit — the asset class that swallowed the industry
Private credit is the single most consequential asset-class shift inside alternatives. The category has grown from a niche middle-market lending strategy in 2010 to the dominant alternative credit channel today, with Preqin forecasting AUM to nearly double from $2.28 trillion in 2025 to $4.5 trillion by 2030. Direct lending to sponsor-backed middle-market borrowers is the largest sub-strategy, but the category now extends across infrastructure debt, asset-backed financing, commercial real estate debt, consumer credit, and specialty lending. The structural drivers are clear: bank regulation since the global financial crisis has progressively pushed leveraged middle-market lending off bank balance sheets and into non-bank lenders; corporate borrowers prefer the speed and certainty of execution of a single private credit lender versus a syndicated loan; investors prefer the floating-rate, illiquidity-premium, current-income profile of private credit relative to traditional fixed income in a higher-rate environment.
At the manager level, the consolidation in private credit is striking. The five largest private credit platforms — Apollo, Blackstone, KKR, Ares, and Carlyle — collectively manage well over $2 trillion of private credit assets. Ares is the only one of the five without a substantial insurance balance sheet, and it is correspondingly the most exposed to fundraising cyclicality. Apollo at $749 billion of credit (82% of total AUM) is structurally the largest, with the deepest investment-grade tilt suitable for insurance-funded deployment. Blackstone’s credit and insurance segment grew 18% in 2024 to $375 billion and reached $432 billion by Q3 2025, with credit now constituting 33% of Blackstone’s total AUM — surpassing private equity at 31% for the first time. That ordering swap inside Blackstone is symbolically important: the firm that built its reputation on private equity now generates more AUM from credit. The same shift is occurring across the industry.
Distribution: the wirehouse, RIA, and the retail frontier
The largest constraint on alternatives growth historically has been distribution access. Institutional LPs were the original customer base because they had the dedicated staff, due diligence resources, and minimum-commitment scale to engage with closed-end fund structures. As Part III established, the product architecture has now evolved to remove those constraints — evergreen funds, BDCs, interval funds, and tokenised products are accessible to clients with $25,000–$250,000 commitment sizes rather than the $5 million minimums of traditional drawdown funds. Distribution has correspondingly expanded into three channels that did not exist as material alternatives buyers a decade ago.
Wirehouses. Morgan Stanley, Merrill Lynch, UBS, and Wells Fargo wealth management have built dedicated alternatives platforms with curated manager rosters, training programmes for financial advisors, and integration into model portfolios. Morgan Stanley’s alternatives platform alone exceeds $200 billion in client assets. The wirehouse channel is the single largest growth lane for institutional-quality alternatives managers because each financial advisor on a wirehouse platform can place clients into evergreen alternatives funds with operational scale that direct-to-consumer channels cannot match.
Independent RIAs. Registered Investment Advisors managing roughly $9 trillion in U.S. private wealth assets have moved aggressively into alternatives over the past three years, supported by platforms like iCapital, CAIS, Yieldstreet, and Moonfare that provide due diligence, subscription processing, and reporting infrastructure. The RIA channel is structurally more open to manager diversity than the wirehouses (which curate to a small approved list), but each individual RIA places smaller dollar amounts. The aggregate is large; the per-relationship dollars are small.
Defined contribution retirement plans. The largest distribution channel that has not yet meaningfully opened. The 401(k) and IRA channel holds approximately $12 trillion of assets, of which less than 1% currently sits in alternatives. The August 2025 executive order on alternatives access in defined contribution plans and the broader regulatory environment that follows is the subject of Part VI — but its mention here is necessary because it is the single largest potential unlock for further alternatives AUM growth beyond 2030.
Why Alternatives Capture The Economics
Traditional active management charges 60 basis points on assets that struggle to outperform their benchmarks. Alternative asset managers charge 100–200 basis points of management fee plus 15–20% carried interest on assets that deliver structurally higher gross returns and are not benchmarked against a public index. The economics of the alternatives end of the barbell are structurally superior to the active mutual fund middle by a wide margin. The largest publicly-listed alternative asset managers trade at premium multiples to traditional asset managers for exactly this reason — the market has already priced in the structural fee differential and the AUM growth trajectory.
Where Part V Goes
Parts III and IV have established the product architecture and the manager landscape of the new barbell. Part V is the flagship section of this report and the centre of gravity of the Fenrir Research thesis on the next decade of capital allocation.
Part V · Infrastructure: The Flagship Allocation. The structural drivers — AI data centre capex, energy security in the post-2022 regime, energy transition and grid resiliency, demographic urbanisation. The return framework that positions infrastructure between core fixed income and traditional private equity. The manager landscape: Brookfield, BlackRock GIP, Macquarie, KKR Infra, Blackstone Infra, DigitalBridge, Stonepeak, IFM. And the regional deep-dives — structured analysis of the United States and Europe, differentiated deep-dives on the Middle East (post-conflict reconstruction, Vision 2030, regional water and power security) and India (the infrastructure deficit thesis, the National Infrastructure Pipeline, GIFT City), and a treatment of Africa as the multi-decade frontier. Epigraph: Radiohead · Pyramid Song.
Part V will be the longest section of the report. It will also include the largest set of charts and the most location-specific analysis. Read it as the operational manifestation of the structural thesis: if the alternatives pie grows to $32 trillion by 2030 and infrastructure becomes the third-largest category, where specifically does that capital go, in what form, and what return profile does it generate.
Sources · Parts III & IV
Cerulli Associates direct indexing market report 2025. Preqin Private Markets in 2030 Report (October 2025). Preqin Future of Alternatives 2029. PitchBook Q1 2025 Global Private Market Fundraising Report. Morningstar Guide to Semiliquid Funds, April 2026. HSBC Asset Management evergreen fund analysis 2025. Alter Domus 2025 Private Markets Year-End Review. XAI Investments Q4 2025 Market Update. Deloitte Center for Financial Services semi-liquid funds analysis 2025. S&P Global Market Intelligence private credit report, November 2025. BlackRock 2024 Global Insurance Report. BlackRock 2025 Annual Shareholder Letter. Apollo Global Management, Blackstone, KKR, Carlyle, Ares, Brookfield Q3 2025 earnings disclosures. Morgan Stanley Parametric direct indexing materials. Fitch Ratings BDC issuance analysis 2025. iCapital Future is Evergreen analysis.
DISCLAIMER · This analysis is for informational purposes only. Not investment advice. All forward-looking assessments are analytical judgements of Fenrir Research based on cited sources. Past performance is not indicative of future results.
Leave a Reply