Private investment opportunities are moving up on the list of what investors want from their financial advisers, according to Natixis Investment Managers (Natixis IM).
The global asset management company’s report details six key trends driving private investment in 2024.
These are:
- The 60/40 portfolio may be back, but will it deliver in 2024?
- The smart money remains bullish on private assets.
- Private credit opportunity expands as traditional lending tightens.
- Tech ranks as a top sector bet in private assets amid AI boom.
- Sustainable investments rank as a top private opportunity in 2024.
- The democratisation of private assets continues to gain steam.
According to the research, the democratisation of private assets is continuing to gain steam as advisers note investor demand for the sector.
Some 34 per cent of global investors have demonstrated interest in private investment opportunities as a service they want from their adviser.
In comparison, 46 per cent of clients seek financial planning from their adviser, 43 per cent want retirement income planning, 43 per cent desire sustainable investment and 32 per cent look for tax-efficient investments.
“Institutional investment has been a boon to private investment over the past decade, and individual investors have taken note. Advisers and wealth managers have responded in kind,” the report wrote.
To respond to this growing demand, 51 per cent of fund selectors at the top wealth management firms said they are offering more private asset strategies to meet higher demand.
Some 61 per cent of fund selectors say retail-friendly private asset vehicles are helping them to enhance client diversification.
Natixis IM’s report also noted that private investments have taken a prominent role in institutional strategies over the past decade. They now account for 83 per cent of all alternative allocations in institutional portfolios, including private equity (29 per cent), private credit (17 per cent), infrastructure (14 per cent) and real estate (23 per cent).
“One reason for investors finding appeal in private equity is the asset classes’ potential to deliver outsized returns based on long-term historical returns,” the report stated.
According to Nitin Gupta, managing partner of Natixis-backed Flexstone Partners, the potential of private assets is attractive even in an environment of higher rates and slowing growth.
“Success comes down to manager selection, especially as median PE returns are very attractive relative to other asset classes and there is a greater variability of returns between top and bottom quartile,” he said.
The term “The democratisation of private assets continues to gain steam” is marketing misleading. There is no democracy in private equity management, fund governance. General Partners with the external counsel were acting as a cartel that breached good faith in fair dealings against institutional investors, Limited Partners in forming Limited Partnership Agreements. In August 2023, US SEC published its Final Rules: Private Fund Adviser 656 page report (Google this report) to partly redress current industry-wide antitrust conduct for new requirements in reporting fees, expenses and against preferential agreements in side-letters that conflicted with other smaller investors. I am drafting a PhD thesis in this sector for further reforms to close the gap between limited partnership and full partnership that would require complete fiduciary obligations. Quarterly reporting is unlikely to stop hiding of additional fees and expenses in the management accounts.