For NEPC and its “peers in the consulting space, the main engine of growth for the last 10 years was OCIO,” McCusker explained. “But we’ve always looked for new segments that we can bring our investment advice to.”
This search for new segments is driven by a stagnant institutional marketplace. With the pool of capital flatlining, chasing a dwindling number of RFPs is a losing game. The logical move for firms like NEPC, which was acquired by wealth manager Hightower last year, is to pivot to the wealth and retail marketplace.
“When you stack up the entire wealth marketplace, wealth plus retail, it's actually a little bit bigger than the institutional world,” McCusker noted. “It's just super, super fragmented.”
And what advisory firms can bring to this fragmented market is expertise in high-demand areas like private credit. This segment is gaining popularity among individual investors, and yet, as McCusker observed, “there’s not a lot of penetration of private markets at all” in the wealth space.
This is in stark contrast to the institutional side, where, as Cliffwater’s Stephen Nesbitt told me back in May, “virtually every institutional search is for private debt.” Nesbitt argues that market is now oversaturated, stating, “All the consultants are playing the same card.” This is why Cliffwater pivoted to a retail client base five years ago.
McCusker sees the recent wave of acquisitions as proof. “It’s sort of validating for us to work with Hightower and then see three or four deals happen since then, of institutional advisors being scooped up by some of these platforms trying to figure out how [to] bring that institutional investing credibility to the wealth marketplace,” he said. It’s a lesson the entire industry is learning.
