IFAs and wealth managers plan to increase their clients’ exposure to private markets, research commissioned by Wealth Club suggests.
Wealth Club, the UK's largest non-advisory investment service for tax-efficient and private market investments, found that financial advisers and wealth managers increasingly favour private markets due to global stock market volatility, a track record of consistently attractive returns, and a recent lack of Initial Public Offerings (IPOs).
The main private markets that financial intermediaries expect to recommend are private equity, real estate, venture capital, private debt and infrastructure.
A survey of IFAs and wealth managers working for organisations managing £75.8 billion in assets for clients revealed that 41% expect inflows from investors into venture capital to rise from 5% to 10% over the next five years, compared with the previous five year period.
Over a third of those surveyed (38%) said they predicted the same 5% to 10% increase in investor cash being funnelled into private debt and infrastructure, while 37% expected the same increase in private equity investment.
Over the next two years the financial intermediaries surveyed expected to see more investor wealth being put into private markets overall.
Seven out of ten (70%) said there would be an increase of between 25% and 50%. Just over one in ten (11%) said this rise would be between 10% and 25%, while 19% predicted an increase of between 50% and 75%.
Almost nine-tenths (87%) of IFAs and wealth managers expect stock market volatility to increase slightly over the next 12 months, the survey found. A drastic increase in volatility was predicted by 9% of respondents, while just 4% thought the situation would stay the same.
The overall value of private market funds is now estimated at around $13.1 trillion worldwide and it will hit $20 trillion by 2031, according to 58% of those surveyed.
Wealth Club founder and chief executive Alex Davies said:
“The shifting sands of global stock market volatility is driving investors towards more stable assets, our research reveals.
“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.”
