According to research from Barclays Private Bank, private equity remains to lead private markets as private wealth investors become more interested.
In the report, Forging New Paths: How Private Investors are Capitalising on the Evolution of Private Markets, private investors can learn more about the growth potential and resilience of venture capital (VC) and private equity (PE), as well as the critical trends to keep in mind when assembling a diversified portfolio.
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It demonstrates that, in spite of more general economic difficulties, private equity funds have raised a record 50.5% of private capital in the year thus far.
As of 2022, there were $14.7trn in assets under management for global closed-end private capital funds; by 2028, that amount is expected to rise to $19.6trn. Since the start of 2023, these funds have raised around $2trn of fresh capital.
The research also discussed how, like their institutional counterparts, private wealth investors are becoming more proactive in private markets as they recognise the opportunities that come with using these fund channels.
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By GlobalData- While PE and VC have good historical returns, the importance of manager selection cannot be overlooked. From 2011 to 2022, PE vintages beat the S&P 500, while VC funds, which have been more volatile, have delivered higher returns, with an 11.8% 15-year internal rate of return (IRR).
- Limited partners (LPs) favour experienced Private Equity managers, with experienced managers closing over 80% of all new PE dollars raised since 2019. This ratio has increased to 88% year-to-date.
- Family offices are diversifying their private market allocations to maximise returns and match with personal ideals or global trends. While high net worth individuals (HNWIs) are increasing the durability and diversification of their portfolios by expanding beyond the 60/40 portfolio into private markets to complement and diversify current public market holdings.
- The dynamics of angel investing have shifted significantly, with high-net-worth individuals increasingly preferring more established and traditional routes. HNWIs have reduced their direct angel investments over the last decade as the private markets industry has expanded to allow private wealth investors to invest in more mature and established companies through funds or direct channels.
- Venture capital has been increasingly dominant in private wealth portfolios, accounting for approximately half of all private capital fund commitments over the last decade. However, the number of VC funds actively raising capital has decreased, creating both obstacles and opportunities for investors looking to preserve their exposure to this dynamic asset class.
Shenal Kakad, head of private markets, at Barclays Private Bank, commented: “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. 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 high-net-worth individuals 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.”
