Wealth firms have dramatically increased their investments in private markets over the last three years, amid rising economic uncertainty stoked by the Covid crisis and rising inflation.

A survey by Delio, a private markets fintech, shows 35% of responding wealth management firms have conducted 20 or more private markets deals in the last 12 months, up from just 6% in 2019.

Delio’s latest Private Markets in Wealth Management report also shows that more broadly in 2019, 46% of survey takers had transacted more than five deals a year, with the proportion rising to 65% three years later.

Nearly all firms - 94% - reported that they either already offer their clients access to the asset class or were working towards doing so. Nearly two thirds, 65%, said that they already have a private markets offering in place.

This chimes with the findings of Citywire Wealth Manager’s recent Top 100 survey, in which 21% of respondents said they favoured investing in real estate and private equity in a recessionary environment.

Most of the Top 100 reported they covered both property and alternatives in their research.

An intensifying trend

The uptick in deals comes as the survey found 88% of wealth managers stated their clients are increasingly seeking access to illiquid investments.

It also follows the launch of several private equity platforms specifically targeting wealth managers. Traditional barriers to investing in private equity include reporting and regulatory requirements, but these can be overcome with new technology.

‘We see the opportunity for wealth managers to increase private market allocations for their clients, which is currently very low.’

Marco Bizzozero, iCapital
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This year private equity house Ares Management launched its first dedicated strategies outside the US, after setting up its wealth management solutions business a year before.

At the time, head of the division Raj Dhanda told Wealth Manager: ‘Demand from non-US investors for private market solutions is sizeable but we believe we are still in the early innings.’

Similarly, Marco Bizzozero, head of the international team at iCapital, in September noted the platform had identified wealth managers as a key market.

‘We see the opportunity for wealth managers to increase private market allocations for their clients, which is currently very low,’ he said.

The same month Private Markets Alpha, founded by ex-Neuberger Berman director Tom Douie, launched a beta version of its platform, solely focusing on wealth managers. Other firms to create dedicated wealth management solutions divisions include Blackstone, Apollo and KKR.

How wealth managers are accessing private markets

According to Delio, the preferred means of accessing private markets has become direct investments, with 71% of wealth managers offering this, up from 59% three years ago.

Alternative funds are less favoured, with only 41% of firms offering access, down from 63% in 2019.

Nearly one in three wealth managers offer impact investments, while 29% provide private credit and 24% offer investments in real estate.

The preferred means of charging for such services is through an advisory fee, which 40% of firms that provide private markets access have adopted.

The joint second most favoured models are charging an issuer placement fee or providing a no-fee service, each adopted by 12% of firms.

Operational challenges were cited by 53% of survey takers as being the biggest barrier to scaling their proposition, with 41% highlighting regulatory risk and a lack of resources.