Greater access to private markets could “transform lives”, says Aberdeen
Providing individuals with greater exposure to private markets can boost retirement returns and “potentially transform lives”, according to Aberdeen Investments.
Aberdeen’s chief executive, Xavier Meyer, said that “private markets have huge potential to transform the lives of investors, as well as channelling investment into public services”.
The asset manager has released a new report, ‘Private market for public good: the opportunities and barriers to democratisation’, where it claims that private markets have outperformed a traditional portfolio strategy (consisting of 60 per cent equities and 40 per cent bonds) by 100 percentage points, since 2007.
“We are not suggesting that traditional portfolios blending investments in equities and bonds should be replaced,” said Nalaka De Silva, Aberdeen’s head of private markets solutions. “Every private market sub-segment has its own dynamics so diversification is essential in mitigating risk within private markets as it is in public markets.”
Read more: Aberdeen partners with Titanbay to simplify private markets access
According to Aberdeen, average investors face several barriers when looking to access private markets. These include low levels of transparency, a lack of reliable benchmarking, big variations in managers’ performance, confusion around how returns are reported, and inconsistencies in how fees are outlined.
Meyer said that if the sector is to attract more individual investors, it will be mostly through pension allocations, which will require open conversations on the issue of risk versus reward and value for money.
The firm emphasised that, while there is room for private markets in ISA portfolios – as per recent announcements by the UK government – pensions remain the ultimate wrapper due to their ultra long-term nature. Aberdeen also argues that investment trusts should not be overlooked.
Read more: Slow uptake expected of private credit in UK ISAs
According to John McCareins, Aberdeen’s chief client officer, the asset class will remain attractive for the long term: “As an increasing number of companies go private or remain private, it will become harder for investors to access growth opportunities via public markets alone. It’s hardly surprising then that we have seen many asset managers snapping up specialist private market companies.”
Aberdeen has been investing in private markets since 1973 and currently holds £68.8bn of assets under management across real assets, private credit and alternative investment solutions.
