The democratisation of private markets has become a well-publicised theme in recent years; yet despite all this excitement, an array of product launches and educational material, the evidence suggests that the wealth sector is moving more slowly towards private markets than expected.

There are various reasons for this slower than expected take-up, but three key investment challenges stand out for the teams at wealth managers who are tasked with overseeing propositions in these sectors.

• An adviser and client audience with disparate views on the value of private markets exposure
• Limited availability of institutional quality long-run frameworks and portfolio construction approaches to help frame public-private investment thinking
• Natural scepticism of what is perceived to be a tsunami of ‘product push’ from private markets providers

Add onto this the painful lessons in illiquidity via daily-dealing UK commercial property funds, in many cases the disappointing recent returns from ‘private assets made liquid’ given discounts in the investment trust sector, and the relentless focus on low-cost options, this reticence is understandable.

For private markets asset managers keen to grow a relationship with the wealth channel, there needs to be more than just educational material. They need to see you as a partner, who is honest and transparent about the role of different private markets asset classes, as well as the return, diversification and liquidity considerations.

Some of the key areas private markets managers need to consider:

Understanding the role of different private markets strategies: There needs to be a wider understanding of the characteristics of each private market strategy and sub-strategy in both economic driver and investment considerations terms.

Public-Private approach to capital market assumptions and strategic asset allocation: The next challenge for wealth managers looking to include private markets exposure is ensuring a robust structure for long-run return modelling.

Portfolio construction challenges: Wealth investment teams need a portfolio construction framework that allows for appropriate flexibility when modelling client solutions.

Overcoming fatigue from ‘the great private markets product push’: The wealth channel may be close to peak saturation of hearing ‘private markets is the next big thing in wealth’ when this is primarily linked to product rather than solutions-oriented collaboration.

Wealth needs partners who approach the channel with an understanding of the nuances of the audience they are targeting, and a recognition that a transparent and truly partnership-orientated approach will go a long way to build understanding and trust.

To read the full white paper by Joanna Stocks, please CLICK HERE