Private market allocations are growing in RIA portfolios, and the due diligence burden is real. Here’s how experienced advisors are handling it, and where third-party platforms fit in.
Your clients are asking about private credit. Some of them already own it, through another advisor or a brother-in-law’s oil deal.
So you look into it. An hour later you’re 80 pages into a private placement memorandum, wondering how a 2-person compliance team is supposed to vet this the way a pension fund would.
That’s where a lot of RIAs are right now. In KKR’s 2025 RIA survey, nearly half of the firms said they put 10% or more of AUM in private markets. And 81% expect to hold or raise that level over the next 5 years.
The appetite is there. The hard part is the work that comes before the allocation.
You’re a fiduciary, so “the sponsor said so” doesn’t count as research. You need to understand the fund’s structure, the manager’s record across more than one cycle, the fees, the liquidity terms and the conflicts. Then you need to keep watching after the money goes in.
That’s a heavy lift for a firm with $200M under management and no dedicated research staff. It’s also why third-party due diligence platforms like FactRight, iCapital and CAIS exist. CAIS alone serves more than 2,500 wealth management firms, and more than three-quarters of the RIAs in KKR’s survey already use third-party platforms to handle onboarding, subscription documents and reporting.
Used well, those platforms take most of the heavy lifting off your desk. The fiduciary duty stays with you.
Why RIAs are Adding Alternatives
Start with the client. Your $10M households compare notes with friends, and lately those notes include private credit funds and stakes in alternative assets. When they ask why they don’t own any, “it’s complicated” stops working pretty fast.
Advisors feel that pressure. In CAIS and Mercer’s latest survey of nearly 800 advisors, 79% of advisors said private markets set their practice apart, and 62% said they help win new clients.
The second push comes from public markets. KKR’s 2025 survey found 90% of RIAs plan to cut or hold their public fixed income exposure, and 84% plan the same for public equity. That money has to go somewhere.
Most of it is heading private. The share of RIAs planning to add private credit jumped from 15% in 2024 to 53% in 2025. Private real estate went from 8% to 42%, which pulls in sectors like multifamily and industrial. Real assets such as oil and gas sit on a lot of the same shortlists.
Then there’s the illiquidity premium. The trade is old and simple: you give up the ability to sell on a random Tuesday, and you get paid for it. How much you get paid swings a lot from one manager to the next, which is the reason due diligence matters.
But the averages tell another story. Cerulli’s US RIA Marketplace 2024 report put the average private markets allocation across RIA portfolios at just 2.3%, with 28.7% of RIAs planning to increase it by 2026 (also via KKR).
So how do you square 2.3% with “nearly half allocate 10% or more”? Look at who answered. More than 81% of KKR’s respondents manage at least $500M, and over 30% manage $5B or more.
The firms already at 10% tend to be big firms with research teams. Plenty of smaller RIAs want to get there. We think a good share of that gap comes down to how much research capacity a firm has.
The Fiduciary Challenge: What Due Diligence Actually Requires
Your obligation here is in writing. In its 2019 interpretation of the adviser standard of conduct, the SEC said the duty of care covers best-interest advice and ongoing monitoring. It also pointed to enforcement cases against advisers who didn’t “independently or reasonably investigate securities before recommending them to clients.”
Private funds get extra scrutiny. In January 2014, SEC exam staff put out a risk alert on how advisers vet alternative investments. Some findings still sting: firms whose Form ADV described diligence they weren’t doing, and marketing materials with “potentially misleading information” about how much diligence was done.
Kitces lays out a good starting framework built on client fit, strategy, operations and costs. It also says plainly that outsourcing the diligence leaves the fiduciary responsibility right where it was. Here’s how we’d build on that for private funds.
Offering Documents
The private placement memorandum, the LPA or operating agreement and the subscription documents hold the real terms. The pitch deck is the sponsor’s best day.
Read the risk factors. Then read the parts on fees, distributions, capital calls and what the manager can change without investor consent. If the deck and the PPM tell different stories, believe the PPM.
Manager Track Record
You want returns across more than one cycle, and you want to know who produced them. Plenty of strategies looked brilliant in 2021, when money was nearly free.
Ask how the team handled 2008 and 2009, or 2022 when rates jumped. Ask whether the people who made those calls still work there. And ask for realized deals alongside the marks, because a mark is still an opinion.
Structure and Fees
An LLC, an LP, a non-traded REIT and an interval fund all handle tax reporting, investor rights and liquidity differently. Know which one you’re looking at before you model anything.
Then add up the fees. Management fees, carried interest or promote, acquisition and disposition fees, admin costs and asset-level fees can stack on top of each other. Check whether the management fee runs on committed or invested capital, and how the hurdle and catch-up work. Run the whole thing to a net number on a realistic gross return.
Liquidity Terms
Lock-ups, redemption windows, notice periods and gates all look harmless in a calm market. But they matter when everyone wants out at once.
In December 2022, Blackstone’s BREIT limited withdrawals after redemption requests blew past its caps. That’s a well-run fund doing what its documents allowed. Your clients need to understand those documents before the gate comes down, since afterward is too late.
Alignment of Interest
Start with co-investment. Ask how much of their own money the principals have in the fund, in which share class, and on what terms. A personal stake held on the same terms as your clients tells you the manager shares the downside.
Then check what can weaken that alignment. Can insiders redeem on different terms, or without notice to other investors? Do the documents require the manager to keep its stake? And how does the sponsor get paid: through fees that grow with assets raised, or through a share of profits above a hurdle?
Finally, look for places where the sponsor’s interests and your client’s could split. Affiliated fees for property management, construction or loan servicing, deals allocated across several of the sponsor’s funds, and who sets the valuation marks are all worth asking about. Most of these are disclosed somewhere in the documents. Your job is to find them and decide whether the manager’s stake in the outcome outweighs them.
Ongoing Monitoring
Diligence keeps going after the subscription docs clear. The SEC folds monitoring into the duty of care, so set a schedule and stick to it.
Track reporting quality, audited financials and K-1 timing. Watch for key-person departures and service provider changes. Kitces flags frequent auditor changes as a warning sign, and we agree.
What We’d Weigh Most
If we had to rank these, we’d put two at the top: how the manager behaved in a bad year, and whether the manager’s money and incentives point in the same direction as your client’s. A clean structure run by a manager who’s never been tested is still a guess.
Why In-house Due Diligence Breaks Down at Smaller Firms
A pension fund has an investment committee, an operational due diligence team and outside consultants on retainer. The median SEC-registered adviser has 8 employees, according to the Investment Adviser Association’s 2026 Snapshot.
Those 8 people also run financial plans, rebalance accounts, answer client calls and keep up with compliance. Asking them to replicate an institutional review on every private fund that crosses the desk is asking a lot.
The Time Problem
Here’s some rough math, and your numbers will differ. Say a careful first review of one fund takes 40 hours once you count the documents, reference calls, background checks and a site visit. Look at 6 funds a year and you’ve spent 6 weeks of one person’s time before any monitoring starts.
And most of those funds won’t make the cut. You pay the full cost of the review whether you say yes or no.
The Expertise Problem
Each private market asks for a different skill set. Underwriting a private credit fund means reading loan tapes and covenant terms. An oil and gas program comes with reserve reports written by petroleum engineers. Multifamily lives and dies on rent rolls and cap rate assumptions.
A CFP with a strong public markets background can learn all of this. But learning it well enough to catch what a sponsor would rather you missed takes years, and most firms don’t have a spare analyst to spend them.
The Liability Problem
Get it wrong and the SEC will ask what your process was. In 2021, it settled charges against Frontier Wealth Management, a Missouri adviser whose clients put about $45M into a feeder fund running complex options strategies.
The underlying fund lost about 35% in February 2018, and Frontier’s clients lost about $16M. The SEC found the firm lacked policies to stop its reps from putting conservative clients into a product they didn’t reasonably assess. Frontier paid a $350,000 penalty plus disgorgement, and one rep took a 12-month suspension.
The lesson for a small firm is uncomfortable. Exam staff judges your diligence by what you can document, and a thin file reads like no diligence at all.
So plenty of smaller RIAs have done the math and skipped alternatives entirely. That choice has a cost too, because the clients asking about private credit can always find an advisor who says yes.
The Rise of Third-Party Due Diligence Platforms
Third-party platforms exist because thousands of advisors were all reading the same PPMs. It makes more sense for one well-staffed team to review a fund once and share the work with every firm that wants it.
These platforms run on 2 different models, and knowing which one you’re using changes how you read their work.
Independent Due Diligence Firms
FactRight is the clearest example. It researches alternative investments and writes reports on sponsors and their offerings for broker-dealers, RIAs and family offices. It doesn’t sell the products it reviews.
Its coverage runs wide: 1031 and DST programs, private real estate funds, oil and gas, non-traded REITs, interval funds, BDCs and private credit, among others. That breadth is important for an RIA, because the sponsors you hear about most often can be too small for the big platforms.
A report from a firm like this usually covers the sponsor’s background and financial condition, the track record, the offering terms, fees and conflicts. A good one also benchmarks the offering against similar funds and flags operational and structural concerns.
Distribution Platforms
iCapital and CAIS do diligence and also host the funds. You find the fund, run the subscription paperwork and get reporting all in one place.
iCapital runs diligence through its own research team. It says it meets with hundreds of fund managers each year and lists only a small share of them. After a fund goes live, the team keeps watching: GP annual meetings, personnel changes, fund amendments and performance.
CAIS hands the diligence to Mercer. Every fund on the platform goes through Mercer’s independent review and ongoing monitoring, and advisors can read the Mercer reports and fund ratings inside the platform.
The scale is real. CAIS now serves more than 2,500 wealth management firms and 65,000 advisors, with more than 600 alternative strategies on the shelf.
How Approval Works
The details differ by platform, but the shape is similar. The sponsor submits its documents and data. Analysts review the offering, check backgrounds, test the track record, and often visit the sponsor’s office or assets in person.
Then comes a decision. A distribution platform either lists the fund or it doesn’t. An independent firm like FactRight publishes a report that lays out strengths and risks, and the advisor makes the call.
For a small RIA, that changes the time math from earlier. Instead of building a 40-hour review from scratch, you start with a professional report and spend your time on the questions that are specific to your clients.
What Third-Party Approval Means (and What It Doesn’t)
A third-party review is a strong signal. It tells you a team of specialists went through the sponsor and the offering and wrote down what they found.
It still leaves you with work. Each layer of review does a different job, and none of them replaces your own.
What a Review Gives You
A good report answers the questions that take the most time and expertise:
- Are the principals who they say they are?
- Does the track record hold up?
- Do the offering documents match the pitch?
- Where are the fees and conflicts hiding?
It also gives you something to put in the file. When an examiner asks how you vetted a fund, a dated third-party report plus your own notes on it makes a far better answer than a sponsor deck.
What It Leaves With You
Client fit is always yours. No platform knows that your client needs $300,000 for a down payment in 2 years, or that a K-1 arriving in September will annoy their CPA. Kitces starts its framework with client appropriateness for a reason.
Sizing is yours too. A fund can pass every review and still be a bad idea at 25% of a client’s liquid net worth.
Then there’s timing. A report captures the sponsor on the day the analysts wrote it. Managers leave, strategies drift and leverage creeps up, so check the report date and ask what’s changed since.
Read The Report Like a Skeptic
Ask who paid for it. In much of the alternatives world the sponsor pays the due diligence fee. Some analysts have been known to rubber-stamp new deals, while others refuse to write a soft report no matter who pays.
That model can still produce honest work, and the best firms protect their reputation by writing hard reports. But you should know the arrangement going in.
Distribution platforms have their own incentive. They earn more when the funds on their shelf raise money, so treat a listing as one input and keep asking your own questions.
And read the whole report, especially the risks. A report can approve a fund and still flag 6 concerns. Each of those concerns is a question you should take to the sponsor, and the answers belong in your file.
One last trap from the 2014 risk alert. If your Form ADV says you rely on third-party due diligence, make sure you actually read and document it. Exam staff have already caught firms describing diligence they weren’t doing.
Aspen Funds and Third-Party Due Diligence: What It Means For Your Practice
Here’s how this works with us. In August 2026, FactRight completed an offering due diligence report on the Aspen Private Credit Fund.
The review covered the fund’s offering terms and structure, fees and sponsor compensation, distributions, investment strategy, how deals are allocated across Aspen’s funds, affiliated transactions, the current portfolio, leverage, valuation policy, audited financials, redemption terms, investor rights, reporting and tax considerations. FactRight also ran legal and regulatory background searches on Aspen’s principals and the fund entities and verified key personnel’s credentials. It found no disqualifying “bad actor” events.
FactRight doesn’t approve or reject funds. Its report sets out what the analysts found, including a section on strengths and a section on risks and mitigants, and leaves the decision with you.
We paid FactRight’s fee for the report, which is how these reviews usually work. We were allowed to check a draft for factual accuracy. We had no editorial control, and we weren’t shown the strengths or risks sections before the report went out.
If you’re considering the fund for clients, you can get the full report through FactRight’s Report Center (login required), or you can contact our team for data room access.
A Practical Due Diligence Checklist for RIAs Evaluating Private Funds
Run these 12 questions on any private fund before it goes in front of a client. Ask them even when a third-party report exists, and write the answers down.
- What’s the legal structure? An LLC, an LP or another pass-through entity each handles investor rights and tax reporting differently. Know what your client actually owns.
- How has the manager done across more than one cycle? Ask for realized results by vintage, find out who made the calls, and confirm those people still work there.
- What are the liquidity terms? Get the lock-up period, redemption windows, notice periods and gate provisions in writing. Then ask what happened the last time redemption requests spiked.
- What does it cost, all in? Add up the management fee, carried interest or promote, admin fees and any asset-level fees. Check whether fees run on committed or invested capital, and model the net return on a realistic gross.
- Has a third party reviewed it? Look for a review by FactRight, iCapital, CAIS or a similar firm. Check the report date, ask who paid for it, and read every risk it flags.
- Are the financials audited every year? Get the auditor’s name and confirm it’s an independent firm. Frequent auditor changes are a warning sign.
- Is the manager SEC-registered? Pull the Form ADV on the SEC’s adviser search and read the disciplinary disclosures yourself.
- What will the K-1 look like? Ask when it typically arrives, how many state filings it triggers, and whether IRA investors face UBTI. Your client’s CPA will ask, so ask first.
- Does management invest alongside investors? Find out how much personal capital the principals have in the fund and whether they’re in on the same terms.
- How often does reporting arrive, and what’s in it? Ask for a sample investor report. Check how often it comes, how assets get valued, and whether it shows performance net of fees.
- What’s the path to liquidity? Know how and when investors get their money back, and what the plan is if the exit market dries up.
- How are conflicts disclosed and managed? Look for affiliated fees, deal allocation across the sponsor’s funds, and any insiders getting better terms than your clients.
If a sponsor won’t answer one of these, treat that as your answer.
Ready to explore Aspen’s funds for your clients? Our team can walk through current offerings and provide compliance-ready materials. Talk to our advisor team.
