Carla Bergareche, Global Head of Wealth, Client Group at Schroders, and Tim Boole, Head of Product Management, Private Equity, Schroders Capital
More than half of advisers and wealth managers across the world are currently investing in private markets, with a further 20% expecting to do so in the next two years, Schroders’ flagship Global Investor Insights Survey (GIIS) has found.
GIIS, which encompasses 1,755 global wealth managers and financial advisers representing $12.1 trillion in assets, reveals that private equity (53%), multi-private asset solutions (47%) and renewable infrastructure equity (46%) are the three private market asset classes that advisers and wealth managers anticipate their clients to increase their allocations to over the next 1-2 years.
On average, how do you anticipate your clients’ allocation to the following private markets asset classes changing over the next one to two years?
Two-thirds of wealth manager and financial adviser respondents highlight that the potential for higher returns than public markets is the most important benefit for investing in private markets for their clients. This was closely followed by achieving diversification through differentiated drivers of return (62%).
On average, most investor allocations to private markets are either 5%-10% or 1%-5% of portfolio exposures.
Carla Bergareche, Global Head of Wealth, Client Group at Schroders, said:
“Whilst many wealth managers and financial advisers are already investing in private markets on behalf of clients, the size of allocations is currently far lower than the 20% or more seen in family office and institutional portfolios. This gap presents a substantial opportunity to deepen client engagement with private markets. We therefore expect private markets to continue to play a growing role in wealth portfolios as investors become increasingly aware of the potential for delivering robust and diversified returns.”
Just over half of wealth managers and advisers surveyed said they were accessing private markets opportunities via listed funds[1], closely followed by semi-liquid/open-ended evergreen funds at 51%.
[1] We believe listed funds include REITs or listed private equity funds
What are the primary ways in which your client accesses private market opportunities?
Despite these opportunities, the potential lack of liquidity is cited as the primary challenge when discussing private markets with clients.
Unsurprisingly, 49% of respondents stated that greater education for clients would further support demand, followed by more suitable product structures (42%) and lower investment minimums (42%).
Tim Boole, Head of Product Management, Private Equity, Schroders Capital, said:
“There is absolutely no question that private wealth is going to play a very significant role in private markets going forward. The options for wealth managers and advisers to access private markets have so far been limited relative to their institutional counterparts, which is why despite intentions, we’re still seeing low allocations.
“However, the emergence of new vehicles, such as semi-liquid funds, are broadening available access points and have been a significant step forward in offering flexibility for investors to meet their investment objectives using private markets. It is therefore unsurprising to see these structures being favoured by this client segment.”
Additionally, wealth transfer was stated as a priority for 59% of wealth managers and advisers globally. In North America, 66% consider wealth transfer to be very important in comparison to the UK (57%), Asia Pacific (57%) and EMEA (58%).
Wealth transfer discussions are far more embedded in the Americas; Latin America has the highest level of engagement globally, with 58% of advisers having discussed wealth transfer with over half their clients. In EMEA and Asia Pacific, engagement is lower, with 43% and 46% of advisers engaging clients on this topic, largely due to cultural sensitivities.
To view the full report, please click here.
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