UK millionaires plan to increase their exposure to private markets over the next few years as they hunt for superior returns, new research from Wealth Club has revealed.
More than a third (37%) of millionaires who already invest in private markets plan to increase their allocations over the next three years, the investment service said.
The study among 341 investors with at least £1 million of wealth found nearly half (48%) have some exposure to private markets outside venture capital trusts, enterprise investment schemes and seed enterprise investment schemes.
They invest mainly in private equity, with 81% of those with private market exposure investing in the asset class, while 34% have chosen to invest in infrastructure and 27% in both real estate and venture capital.
Just over a third (36%) hold between 1% and 5% of their portfolio in private markets, while 35% hold between 6% and 10%.
Wealth Club said that a lack of knowledge or understanding poses the biggest barrier for those who do not currently invest in private markets (56%), followed by illiquidity (42%), valuation concerns (33%) and a lack of transparency (30%).
Investment trusts are currently the most popular structure for investing in private markets, with 78% of existing private market investors opting for this approach, while 42% invest directly.
Semi-liquid funds are currently used by just 9%, however, almost a quarter (24%) already regard semi-liquid private market funds as attractive, despite 31% either not knowing what they are or not yet having an opinion on them.
Alex Davies, founder and CEO of Wealth Club, said: “Private markets are quietly becoming mainstream for millionaires, with nearly half already having some exposure and more than a third of those investors planning to increase their allocation.
“The key attraction of private markets is that they offer access to a wider range of investment opportunities which were previously largely the preserve of institutional investors. Nearly six out of 10 millionaires in our survey believe the greatest investment opportunities over the next five years will come either from private companies or a mix of public and private companies.
“Investment trusts have traditionally been the main way individual investors have accessed private markets, but the arrival of semi-liquid funds is giving eligible investors another route. They are still relatively new and awareness remains low, but we expect them to become increasingly important as investors become more familiar with them.”
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