Private investors are planning to increase their allocations to private markets in the future as they view the sector as an attractive route for capital appreciation and diversification, according to Barclays Private Bank and Wealth Management.

Its second annual private markets report found that 79 per cent of private investors expected to increase their future allocations to private markets.

Almost half (48 per cent) of respondents who were not currently invested in private markets said they were considering entering the sector, while 89 per cent of those already invested saw them as an important part in shaping their overall investment strategy.

Of the private investors already participating in private markets, 91 per cent saw them as an attractive route for capital appreciation, 89 per cent were wiling to accept less liquidity for long-term gain, and 89 per cent valued the ability to diversify beyond public markets.

Nearly half (48 per cent) of respondents not investing in private markets said they would consider doing so if key obstacles were addressed, with 56 per cent stating the primary barrier was perceived risk and uncertainty.

Barclays Private Bank and Wealth Management said that professional advisers could play and important role in addressing this, as 69 per cent of private investors said they used trusted wealth managers and/or relationship managers as a key source of advice for information on private markets investment.

Asset classes

Private equity and real estate remained the leading asset classes within private markets, attracting 73 per cent and 75 per cent of current investors respectively.

However, the report noted that the landscape was changing, with 47 per cent now actively considering private debt/credit, while 43 per cent were looking at venture capital and 33 per cent were considering secondaries for future investment.

Of those not participating in private markets, 68 per cent were interested in real estate, 59 per cent were considering private equity, and 30 per cent were looking at private debt/credit.

Barclays Private Bank and Wealth Management said that interest in real estate and private equity appeared to be stemming from greater familiarity with these asset classes, with the majority of investors reporting a stronger understanding of real estate and private equity compared to other private market assets.

General partners

Three quarters (75 per cent) of general partners (GP) felt the current investor sentiment towards private markets was positive.

The report found that co-investments had become commonplace, with 83 per cent of GPs using the structure to serve clients, while firms managing more than $100bn used a range of strategies including evergreen (80 per cent) and feeder funds (71 per cent) to meet increasingly sophisticated investor needs.

However, 58 per cent of GPs believed the current private markets environment was less attractive compared to previous fundraising cycles, although 73 per cent were more positive on the future and expected private markets performance to be better over the next 12 months.

“Private markets are no longer a niche and are becoming a more common component of high-net-worth investor strategies, and we are seeing that private investors are showing a growing level of sophistication in their approach to the asset class,” said Barclays Private Bank and Wealth Management global head of private markets, Shenal Kakad.

“They are scrutinising opportunities more closely, favouring established managers, and exploring structures that offer both performance potential and liquidity flexibility. This marks a clear shift from access to strategy.”

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