Advisers and wealth managers plan to increase their clients’ exposure to private markets as a result of global stock market volatility, according to Wealth Club.
Research by the investment service found that advisers and wealth managers were also attracted to private markets due to a track record of consistently attractive returns and a recent lack of initial public offerings.
Alex Davies, founder and chief executive of Wealth Club, said: “The shifting sands of global stock market volatility is driving investors towards more stable assets. 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.”
The main private markets that financial intermediaries favour are private equity, real estate, venture capital, private debt and infrastructure.
Wealth Club’s research found that 41% of advisers and wealth managers 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 (38%) of those surveyed said they predict the same 5-10% increase in investor cash being funnelled into private debt and infrastructure, while 37% expect the same increase in private equity investment.
Over the next two years, financial intermediaries expect to see more investor wealth being put into private markets overall, the firm said.
Seven out of 10 (70%) said there would be an increase of between 25% and 50%, while 11% expect the rise to be somewhere between 10% and 25%. Just under a fifth (19%) predict an increase of between 50% and 75%.
At the same time, 87% of advisers and wealth managers expect stock market volatility to increase slightly over the next 12 months, while 10% are predicting a drastic increase.
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