Surging interest in private markets, but knowledge gap must be bridged

A new survey has revealed that virtually all advisers are planning to allocate some portion of their client portfolios to private markets this year.

In response to the recent wealth adviser survey by Hamilton Lane, a specialist investment management firm focused on global private markets, more than half of advisers (52%) expressed their intention to allocate more than 10% of clients’ portfolios to private markets.

More than nine out of 10 advisers said they currently allocate client capital to private markets.

Further, more than two out of three advisers (70%) advisers plan to increase clients’ allocation to the asset class compared to 2023.

The results from the survey affirmed what Hamilton Lane said was a broader industry trend of “strong, growing interest” among non-institutional investors for private market investments.

Within the private markets space, most investors were currently invested in the equities or credit sectors, though a significant number expressed growing interest in allocating to real estate and infrastructure.

Advisers primarily cited performance and diversification as the primary reasons for their increased interest in private markets.

Addressing the knowledge gap

However, while advisers – as expected – appeared well-versed on matters regarding private markets investments and the broader universe of alternatives, their clients appear substantially less knowledgeable.

For instance, while 55% of advisers rated their clients’ knowledge of private markets as advanced – that is, showing confidence in talking about private market details, trends and products – just 4% of their clients expressed the same confidence.

Around half of the surveyed advisers rate their clients’ knowledge of private markets investments at a beginner level, showing “little to no knowledge” despite their strong interest in the asset class.

For Hamilton Lane, this presents an opportunity for advisers “to increase end investors’ private markets knowledge”.

“The punchline from this survey was an affirmation that as interest in private markets grows, there is a clear need for more education,” said Steve Brennan, head of private wealth solutions at Hamilton Lane.

“We’ve found that a foundational understanding of the asset class affirms initial interest from new investors and contributes to a sustained investing appetite for those who are already allocated.

“We anticipate that, as private wealth investors become more knowledgeable about and familiar with the asset class, private markets allocations will likely also increase.”

Considering the private markets tools and information advisers would find helpful in their practice, advisers cited education (81%), thought leadership (70%) and events (58%) as the top three ways to improve their clients’ knowledge of the asset class.

“Our survey shows that giving private wealth clients more opportunities to learn about private markets investing can help both advisers and clients achieve their goals,” said Scott Thomas, Hamilton Lane’s head of private wealth, Australia.