Fidelity Investments has announced a significant expansion of its investment management capabilities with the introduction of custom model portfolios that incorporate alternative investments, marking a strategic move to provide wealth management firms with enhanced access to private market opportunities. This development represents the latest evolution in Fidelity’s comprehensive approach to portfolio construction and reflects growing advisor demand for diversified investment solutions that extend beyond traditional asset classes.
Democratizing Access to Alternative Investments
The new offering centers around Fidelity Custom Model Portfolios, which utilize an open-architecture approach that combines investment strategies from both Fidelity and third-party asset managers. The key innovation lies in the integration of alternative investment vehicles, including interval funds and tender offer funds, which have traditionally been more difficult for advisors to access and implement for their clients.
This expanded capability will be available to eligible registered investment advisors (RIAs) and broker-dealers (BDs) through Fidelity’s strategic partnership with Envestnet, delivered via its comprehensive wealth management platform. The collaboration leverages the strengths of both organizations to provide advisors with sophisticated investment solutions that can help them better serve their clients’ diverse needs.
The timing of this announcement reflects broader industry trends toward alternative investment adoption. Financial advisors are increasingly recognizing the potential benefits of incorporating non-traditional assets into client portfolios, but many have found the implementation process complex and resource-intensive. Fidelity’s new offering aims to address these challenges by providing a streamlined, professionally managed solution.
Strong Advisor Interest Drives Innovation
The development of these alternative-enabled model portfolios was informed by substantial market research that revealed significant advisor interest in expanded investment options. In a recent Fidelity survey of financial advisors, nearly half of respondents—46% specifically—indicated they were very interested in model portfolios that offer diversified exposure to both traditional and alternative investments.
This high level of interest underscores the evolving needs of financial advisors as they seek to provide clients with more sophisticated portfolio construction options. The survey results suggest that advisors recognize the potential benefits of alternative investments but may lack the resources, expertise, or operational infrastructure to effectively implement these strategies independently.
Amanda Robinson, head of Wealth Advisory Managed Solutions Distribution at Fidelity Investments, addressed this market dynamic directly: “Wealth managers are looking for opportunities to expand beyond traditional asset classes to diversify portfolios, but may see implementation of alternative investments as a complex process. Fidelity’s open-architecture, custom model portfolios can offer an efficient and tailored solution to help meet advisors’ and their clients’ needs.”
Robinson’s comments highlight the core value proposition of the new offering: reducing complexity while expanding opportunity. By providing professionally constructed and managed portfolios that incorporate alternatives, Fidelity enables advisors to offer sophisticated investment strategies without requiring them to develop specialized expertise in alternative investment analysis and due diligence.
Rigorous Portfolio Construction Process
The portfolio construction and management responsibilities for these custom models fall under the oversight of Fidelity Institutional Wealth Adviser LLC (FIWA), which brings substantial expertise and resources to the alternative investment selection process. FIWA maintains a specialized alternative investment manager research team with extensive experience in evaluating and selecting alternative investment opportunities.
This research team employs a comprehensive analytical framework that combines both quantitative and qualitative analysis methods. The team’s approach includes a rigorous due diligence process designed to identify managers in whom they have high conviction, ensuring that only thoroughly vetted alternative investment options are included in the custom model portfolios.
The systematic portfolio construction process leveraged by FIWA goes beyond simple asset selection to incorporate proprietary research and insights from across Fidelity’s organization. This comprehensive approach enables the creation of portfolios specifically designed to help investors achieve their long-term financial objectives while managing risk appropriately.
The integration of Fidelity’s broader research capabilities represents a significant advantage in portfolio construction. The firm’s scale and resources allow for in-depth analysis of market trends, manager performance, and risk factors that might not be available to smaller investment firms or individual advisors working independently.
Comprehensive Portfolio Solutions for Diverse Needs
Fidelity’s introduction of alternative-enabled custom model portfolios represents just one component of a broader suite of portfolio construction capabilities designed to serve the diverse needs of wealth management firms. The company recognizes that different advisors have varying levels of resources, expertise, and client service models, requiring flexible solutions that can accommodate these differences.
For advisors seeking to scale their practices through outsourcing arrangements, Fidelity offers both the new custom model portfolios and an established suite of turnkey Fidelity Model Portfolios. These turnkey solutions provide professionally managed, diversified portfolios that advisors can implement with minimal ongoing management requirements, allowing them to focus on client relationship management and business development activities.
Robinson indicated that the expansion into alternatives represents just the beginning of Fidelity’s model portfolio evolution: “With the new alternatives capabilities in our custom model portfolios, we also remain focused on growing our turnkey lineup of models in the coming months.” This suggests that investors and advisors can expect continued innovation and expansion of available options.
For financial advisors who prefer maintaining more direct control over portfolio construction decisions, Fidelity provides additional tools and resources. These include the Portfolio Quick Check tool, which offers analytical capabilities for portfolio evaluation, and access to portfolio construction specialists who can provide personalized consultation and guidance.
Educational Resources and Thought Leadership
Recognizing that successful implementation of alternative investments requires ongoing education and support, Fidelity has developed comprehensive educational resources for advisors. The company maintains a robust library of thought leadership materials and research insights specifically focused on alternative investments and their potential role in enhancing client portfolios.
One key resource is “An advisor’s guide to alternative investments,” which provides practical guidance for advisors considering the integration of alternatives into their client service offerings. This educational content helps advisors understand not only the potential benefits of alternative investments but also the risks and considerations that should inform implementation decisions.
The educational initiative includes recently updated research from FIWA titled “Alternative investments and their roles in multi-asset class portfolios.” This research provides detailed analysis of how alternative investments can be effectively integrated with traditional asset classes to create more diversified and potentially more resilient portfolio structures.
Strategic Partnership Enhancement
The launch of alternative-enabled custom model portfolios builds upon the longstanding strategic relationship between Fidelity and Envestnet, demonstrating how established partnerships can evolve to deliver enhanced value to advisors and their clients. This collaboration combines Fidelity’s investment management expertise and alternative investment capabilities with Envestnet’s technology platform and advisor support infrastructure.
The partnership approach allows both organizations to focus on their core competencies while delivering integrated solutions that neither could provide as effectively independently. For advisors, this means access to sophisticated investment strategies through familiar technology platforms with comprehensive support resources.
The expanded offering represents a natural evolution of the Fidelity-Envestnet relationship, which has previously focused on delivering personalized investment solutions designed to help advisors grow and scale their businesses while better meeting investor needs. The addition of alternative investment capabilities enhances this value proposition by expanding the range of available investment strategies.
Fidelity’s Alternative Investment Platform Scale
The new custom model portfolio offering leverages Fidelity’s substantial existing infrastructure in alternative investments. The firm serves as a leading provider of custodial services in the alternative investment space, offering access to more than 6,000 proprietary and third-party alternative investment products.
This extensive platform oversees more than $95 billion in assets under administration specifically related to alternative investments, serving both institutional and intermediary clients. The scale of this operation provides important context for understanding Fidelity’s capabilities in alternative investment selection, due diligence, and ongoing monitoring.
Beyond custodial services, Fidelity actively manages alternative investment vehicles through its asset management divisions. The firm’s alternative investment capabilities span multiple strategies, including private equity, private credit, real assets, liquid alternatives, and digital assets. This breadth of expertise enables comprehensive evaluation and selection of alternative investment opportunities across diverse market segments.
Fidelity’s alternative investment lineup includes more than 60 funds, comprising both funds available to eligible external investors and funds utilized by the firm’s investment team for portfolio construction purposes. The total assets under management across these alternative investment vehicles exceeds $41 billion, demonstrating the substantial scale and scope of Fidelity’s alternative investment operations.
Market Context and Industry Trends
The introduction of alternative-enabled custom model portfolios reflects broader trends within the wealth management industry toward greater integration of non-traditional investments. Institutional investors have long recognized the potential benefits of alternative investments for portfolio diversification and return enhancement, and these benefits are increasingly being recognized as relevant for individual investor portfolios as well.
Several factors have contributed to growing interest in alternative investments among retail and high-net-worth investors. These include prolonged low interest rate environments that have reduced the income generation potential of traditional fixed-income investments, increased market volatility that has highlighted the importance of diversification, and improved access to alternative investment vehicles that were previously available only to institutional investors.
The development of interval funds and tender offer funds has been particularly important in making alternative investments more accessible to individual investors. These structures provide some degree of liquidity while allowing investment in traditionally illiquid alternative assets, addressing one of the primary concerns that have historically limited retail investor participation in alternative investment strategies.
Risk Considerations and Investor Suitability
While expanding access to alternative investments through custom model portfolios, Fidelity maintains appropriate emphasis on the risks and considerations associated with these investment strategies. The firm clearly communicates that alternative investment strategies may not be suitable for all investors and should not be considered a complete investment program.
Key risks associated with alternative investments include relative illiquidity compared to traditional investments, potential difficulty in determining current market values, and limited availability of historical risk and return data. Additionally, the costs associated with purchasing and selling alternative investments may be relatively high, and a high degree of investment analysis may be required before making investment decisions.
These risk disclosures ensure that advisors and their clients maintain realistic expectations about alternative investments while understanding both their potential benefits and limitations. The professional management and due diligence provided through Fidelity’s custom model portfolios help address some of these challenges, but cannot eliminate the inherent risks associated with alternative investment strategies.
Looking Forward
Fidelity’s launch of custom model portfolios with alternative investments represents a significant step forward in democratizing access to sophisticated investment strategies. By combining professional management, rigorous due diligence, and comprehensive platform capabilities, the offering addresses many of the traditional barriers that have limited advisor and client access to alternative investments.
The success of this initiative will likely depend on several factors, including advisor adoption rates, client acceptance of alternative investment strategies, and the performance of the underlying alternative investments selected for inclusion in the model portfolios. However, the strong advisor interest revealed in Fidelity’s survey research suggests significant potential demand for these expanded capabilities.
As the wealth management industry continues to evolve, initiatives like Fidelity’s alternative-enabled custom model portfolios may become increasingly important in helping advisors differentiate their services while providing clients with access to institutional-quality investment strategies. The ongoing expansion of this offering, as indicated by Robinson’s comments about growing the turnkey model lineup, suggests that Fidelity views alternative investment integration as a long-term strategic priority rather than a short-term market response.
