Four in five (82%) wealth managers expect retail clients to increase investment in private equity investments over the next five years.
Half (52%) of the 100 wealth managers and IFAs surveyed by Wealth Club, a provider of VCTs and EISs, said that up to 25% of clients were already investing in private markets.
The proportion of advisers who said over half of their clients would likely invest in private markets within three years is expected to treble from 4% to 13%, according to Wealth Club.
The number of advisers with minimal client exposure to private markets (up to 10% of clients) is expected to shrink from 23% to 9% in three years time.
Private equity is expected to be the most popular of alternative classes, with 53% of advisers expecting a significant rise of client inflows into the sector.
Infrastructure markets were set to be another beneficiary in the rise of private market investments, with 75% of advisers expecting allocations to the asset class from clients to increase over the next five years.
Real estate and venture capital were also set to see rises, but at a more tempered rate. Two in three (66%) advisers expected real estate inflows to increase, but 11% predict flows in this area to decrease due to the macro-economic sensitivity of commercial property valuations.
A similar number of advisers (61%) expect venture capital inflows from clients to increase, although a third (35%) expected allocations to hold steady.
Adviser expectations of inflows for the next five years
Sector | Decrease materially | Decrease slightly | Stay the same | Increase slightly | Increase significantly | Increase dramatically |
Private equity | 0% | 2% | 16% | 29% | 40% | 13% |
Infrastructure | 0% | 6% | 19% | 38% | 21% | 16% |
Private credit | 0% | 7% | 28% | 26% | 23% | 16% |
Real estate | 0% | 11% | 23% | 39% | 18% | 9% |
Venture capital | 0% | 4% | 35% | 30% | 26% | 5% |
Source: Wealth Club
Advisers also expected a deeper commitment of capital from clients toward the private markets.
Alex Davies, founder and CEO of Wealth Club, said: "These findings suggest private markets are becoming an increasingly important part of wealth management portfolios in the UK. Advisers are not only expecting more clients to invest in private markets, they're also expecting those clients to allocate a greater share of their wealth to the asset class."
Currently only 3% of wealth managers and IFAs surveyed said they allocated more than 30% of their clients’ total investible assets to private markets. In three years, that figure is projected to rise to 13%.
Listed investment trusts were the most popular access route to private markets currently, utilised by 57% of advisers. Advisers using semi-liquid funds are expected to climb slightly from 43% today to 48% in three years, drawing level with listed investment trusts.
Traditional closed-ended drawdown funds are also expected to rise a little from 32% to 37%, as sophisticated investors become more comfortable locking away capital for seven to 10 years.
Wealth Club surveyed 100 UK-based wealth managers and IFAs responsible for £332.7bn in assets in the first half of this year.