HNW clients set to increase private market exposure by up to 50pc
Most financial intermediaries expect clients’ private market exposure to increase significantly over the next two years, as a means of diversifying away from stock market volatility and earning higher returns.
A recent survey by Wealth Club – a non-advised brokerage service offering sophisticated and high-net-worth investors access to tax-efficient and private market-focused vehicles – found 70 per cent of wealth managers and IFAs were predicting a 25-50 per cent higher allocation to private assets.
Nearly one in five (19 per cent) expected this to increase even more – between 50 and 75 per cent.
11 per cent of respondents foresaw a rise of between 10 per cent and 25 per cent.
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Reasons cited for growing interest included higher global stock market volatility, the potential for “consistently attractive returns” and a recent lack of initial public offerings (IPOs).
Wealth Club carried out a June survey of 100 IFAs and wealth managers whose firms are responsible for £75.8bn in client assets.
The findings revealed 38 per cent predicted a five to 10 per cent increase in assets directed towards private debt and infrastructure over the next five years, compared with the previous five-year period.
Slightly more respondents – 41 per cent – expected comparable flows into venture capital when considering the same timeframes, while 37 per cent expected the same increase in private equity investments.
The main private markets referenced in the survey were private equity, real estate, venture capital, private debt and infrastructure.
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Of those surveyed, 87 per cent of advisers and wealth managers said they thought stock market volatility would increase slightly over the next 12 months. Nine per cent of respondents said they expected a drastic increase in volatility, while four per cent expected things to remain as they are currently.
Estimating today’s overall value of global private market funds to be $13.1tn (£9.6tn), 58 per cent of those surveyed thought it will increase to $20trn by 2031.
Wealth Club was set up in 2016 by former Hargreaves Lansdown director Alex Davies.
“The shifting sands of global stock market volatility is driving investors towards more stable assets, our research reveals,” said Wealth Club founder and chief executive Davies.
“Returns from private markets can be reasonably uncorrelated with this global uncertainty, so it is clear why IFAs and wealth managers consider these a no-brainer for some of their sophisticated and high-net-worth individual investors. With more and more companies delisting from stock markets or staying private for longer it also gives them a far greater investment pool from which to choose.”
The platform currently offers 11 private market funds from nine managers, with minimum investments of £10,000.
Read more: North American investors turning to private credit amid market volatility
