Semi-liquid funds motivating advisers to increase personal investment in private markets

Wealth managers and independent financial advisers (IFA) are planning to boost their personal private market investments as semi-liquid vehicles become increasingly available, research from Wealth Club has revealed.

The non-advised investment service for high net worth individuals (HNW) found that 74 per cent of UK wealth managers and IFAs intended to increase their own personal allocations to private markets due to the proliferation of semi-liquid funds.

Advisers were already putting their own money into private markets, with 98 per cent of respondents holding some private market investments, excluding venture capital trusts and the Enterprise Investment Scheme.

Nearly three quarters (74 per cent) of wealth managers and IFAs were maintaining a personal allocation above 5 per cent.

However, a substantial acceleration is expected over the next three years, with the proportion of advisers with over 5 per cent of their personal wealth in private assets forecast to rise by 10 percentage points.

Furthermore, the proportion of those with between 10 per cent and 25 per cent of their personal wealth invested in private markets was forecast to increase from 19 per cent to 32 per cent in three years’ time.

Wealth Club noted that advisers were adopting a multi-structured approach to accessing private markets in their own portfolios.

Four in 10 (40 per cent) used semi-liquid or evergreen fund vehicles, while the same proportion invested in private assets via traditional listed investment trusts.

Nearly two fifths (39 per cent) held direct private market investments, and 32 per cent maintained legacy allocations in traditional closed-ended drawdown funds.

"There's no stronger endorsement of an investment than when the professionals responsible for managing other people's money choose to invest in it themselves,” commented Wealth Club founder and CEO, Alex Davies.

“It's particularly telling that almost three-quarters of wealth managers and IFAs say they plan to increase their own private market allocations because of the growing availability of semi-liquid funds.

"For most individual investors, private markets have historically been largely out of reach. While investment trusts and other specialist vehicles have provided some access, many of the world's leading private equity, private credit and infrastructure managers were simply unavailable, while traditional private market funds often required very large minimum commitments and complex capital call structures.”

Davies noted that this status quo was being changed by semi-liquid funds, which were opening up access to a wider range of managers and strategies and removing many of the practical barriers that held investors back in the past.

“They also remove the discount and premium volatility associated with listed investment trusts, allowing investors to focus on the performance of the underlying assets,” Davies continued.

"When advisers are increasing their own exposure before recommending the asset class more widely, it's a strong indication they believe private markets will become an increasingly important part of long-term portfolios."

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