Wealth management clients are seeking greater exposure to private markets, as they seek to shield themselves from market volatility and balance their portfolio risk, a new report from Delio has shown.
According to the Private Markets in Wealth Management 2022 report, nearly nine in 10 (88%) wealth managers said clients are seeking access to illiquid investments. Wealth managers are responding accordingly, with 94% of firms saying they now offer or are planning to offer their clients access to alternative assets.
The fintech said the recent volatility in public markets “underlines why private markets have risen in popularity so much.”
Alternative assets have remained relatively immune to the turmoil in the markets, making them an “essential component of a portfolio seeking investment returns,” the group said.
Gareth Lewis, chief executive and co-founder of Delio, said: “The importance of private markets to wealth management clients is now clear for all to see. The question for wealth managers is no longer if they offer access to alternative assets but how they do so in a scalable and efficient way.
“While there is definitely risk inherent in these types of investments, the way that risk manifests is very different from public markets. The relatively illiquid nature of private markets means they are less affected by a shift in sentiment due to external factors, which we see in public markets regularly, and especially in the last few weeks.
“This makes them a great addition to a diversified portfolio. It is no wonder more wealth managers are seeing how important they have now become for their clients.”
Delio said the past three years have seen the number of investment opportunities available to clients increase, yet most firms appear to be consolidating their offering into either direct investments, which are offered by 71% of wealth managers, or alternative funds. Impact investments remain popular and are offered by just over one in three firms, while 29% of wealth managers offer private credit deals.
Lewis said: “Our research highlights the notable shift in approach that wealth managers have taken in the last three to four years. This is largely due to the significant market turbulence we have seen over this period, firstly due to the pandemic and more recently because of the war in Ukraine and the latest political upheaval. There is no escaping the fact that political decisions have a major impact on the markets, which has been dramatically illustrated in the last fortnight.
“Prior to this, many firms were still in the planning stage when it came to offering private markets to their clients. However, these recent periods of instability have simply confirmed the fact that investors want to allocate more of their wealth to private assets in a bid to mitigate the vagaries of political and economic impacts on their portfolios.”
Lewis said the shift had forced slow adopters to accelerate their plans to offer alternative assets to clients, while early adopters have been able to shift gears quickly and consolidate their market advantage.
