This was particularly evident among the larger firms, with 83% of those with assets under management of more than $500bn having private markets solutions, perhaps indicative of many having made targeted acquisitions in recent years.
Among all sizes of asset managers we spoke to who do invest in private markets, almost all (90%) said it remains a strategically important objective for business growth, with 60% saying it had even accelerated as a priority over the last 12-months.
So, who is buying these products if the priority has increased so substantially? Historically the demand has come from institutional investors as the asset class often requires large upfront minimum investments and the capital is often locked away for long periods, yet it now appears that asset managers are turning their attention to other investors.
The Financial Times reported that with many large institutions having up to 50% of their portfolios in alternative assets, managers are now looking at retail investors for the next wave of demand. This was borne out by McKinsey’s research which found the average retail investor has just 2% of their portfolio in alternatives.
Several of the firms we spoke to also echoed this sentiment, noting that they were working on launching more solutions for the retail / wholesale audience, with one firm noting that this shift in approach had come directly from intermediaries asking for them to create new solutions.
While intermediary channels may provide more avenues for capital in the future, this doesn’t come without its own set of challenges. Most participants cited the strict regulation governing the marketing of these products as limiting what they are able to say publicly, particularly around private placements.
There is one storyline, however, that we may begin to see more of in the future. Prequin data published earlier this year showed that 42% of global private market capital is managed in funds that are run with sustainable investment principles, so whilst private markets haven’t traditionally been associated with responsible investing, for those who can demonstrate transparency and genuine impact through their activities, this could be a key differentiator in 2023.
This year the Investment Communications Trends Report has been divided into three shorter, standalone reports – Private Markets; ESG; and Content & Digital, all of which will be made available over the coming weeks.
To read the first report on private markets please complete the form below.