Wealth managers and IFAs expect need for private markets exposure to grow

Wealth managers and independent financial advisers (IFA) believe that high net worth (HNW) and retail investors need to have exposure to private markets to access a wider range of growth opportunities, Wealth Club has found.

The non-advised investment service for HNW individuals conducted research that showed 30 per cent of wealth managers and IFAs felt private markets access to capture the high-performing growth phase of a company’s lifecycle was ‘essential’, while 59 per cent saw it as ‘very important’.

It noted that this trend was evolving into a long-term strategic view, with 92 per cent of wealth managers and IFAs expecting the need for HNW investors to be exposed to private markets to access growth opportunities would accelerate over the next five years.

Furthermore, 94 per cent said that relying solely on a conventional listed equity portfolio risked missing out on the ‘primary wealth-generation engines’ of the modern economy, including 31 per cent that strongly agreed.

Assessing the benefits of private markets over traditional 60/40 portfolios, Wealth Club highlighted several institutional-grade advantages.

Nearly three quarters (72 per cent) of wealth managers and IFAs pointed to the enhanced long-term capital growth benefits as a benefit, while 48 per cent cited inflation protection, and 47 per cent highlighted access to unique, non-public market sectors.

Over a third (35 per cent) cited reduced portfolio volatility as an advantage, and 26 per cent pointed to lower correlation with public markets.

"These findings suggest private markets are approaching a tipping point among individual investors in the UK,” said Wealth Club founder and CEO, Alex Davies.

“For decades, pension funds, insurers and endowments have used private equity and private credit as important components of their portfolios.

“Increasingly, wealth managers and IFAs believe suitable investors should also have the opportunity to access these strategies.

"With companies staying private for longer, much of the potential upside now comes before they reach public markets. By the time they list, investors have often missed a significant part of their growth.

"Private markets are moving from being a niche allocation to becoming an increasingly important part of a well-diversified long-term portfolio. Investors who ignore them risk missing an increasingly important source of long-term growth."

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