Private equity (PE) is continuing to lead private markets amid growing interest from private wealth investors, according to a new report from Barclays Private Bank.

Its report, Forging New Paths: How private investors are capitalising on the evolution of private markets, highlighted the resilience and growth potential of PE and venture capital (VC), looking at the key trends that private investors could consider when structuring a diversified portfolio.

It found that family offices and private wealth investors were increasingly following institutional investors as interest in private markets grew.

Despite broader economic challenges, the report found that PE funds had captured a record 50.5 per cent of private capital fundraising in the year to date.

Global closed-end private capital funds had assets under management of $14.7trn, as at 2022, a figure that was projected to rise to $19.6trn by 2028.

These funds have collectively raised nearly $2trn in additional fresh capital since the beginning of 2023.

Barclays Private Bank’s report highlighted private wealth investors’ growing interest in private markets as they increasingly recognised the opportunities these fund channels can present.

The report noted that while both PE and VC exhibited strong historical returns, the significance of manager selection “cannot be understated”.

Limited partners (LPs) were found to prefer experienced PE managers, with more than 80 per cent of all new PE monies raised closed by experienced managers in each year since 2019.

Furthermore, family offices were increasing and diversifying their private market allocations, the report noted, which it said reflected a desire to capture higher returns and align investments with personal values or global trends.

Meanwhile, high net worth individuals (HNWI) were driving greater resilience and diversification in their portfolios by looking beyond the 60/40 portfolio into the private markets, seeking to complement and diversify existing public market exposures.

The report also highlighted a “significant shift” in the dynamics of angel investing, with HNWIs increasingly favouring more established and traditional channels.

“HNWIs have pulled back somewhat from direct angel investments over the past decade as the wider private markets industry has evolved to allow private wealth investors to invest in more mature and established companies via funds or direct channels,” the report stated.

VC was found to be increasingly dominant in private wealth portfolios, with almost half of all private capital fund commitments over the past decade being allocated to VC by count.

However, the number of VC funds actively raising capital has declined, which Barclays Private Bank said presented both challenges and opportunities for investors seeking to maintain their exposure to the asset class.

"Our report underscores the evolving sophistication of private wealth investors, who are increasingly adopting institutional strategies in their pursuit of higher returns and portfolio resilience,” commented Barclays Private Bank head of private markets, Shenal Kakad.

“We are also seeing growing demand from clients looking to make private market allocations based on their desire to not only capture higher returns but also to align with their personal values or global trends.

“For HNWIs and family offices the opportunities within private markets are significant, but these markets are complex. Identifying the right opportunities requires expert guidance, coupled with deep knowledge of fund structures.”

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