Advisers need to tackle private markets knowledge gap

According to global private markets investment management firm Hamilton Lane’s global survey of more than 230 investment advisers, the uptake of investment in private markets is continuing to grow.

More than 90 per cent of survey respondents currently allocate client capital to private markets, while 99 per cent said they are planning to allocate some portion of client portfolios to the asset class this year

Additionally, over half of advisers (52 per cent) reported that they plan to allocate in excess of 10 per cent of clients’ portfolios to private markets, which Hamilton Lane said “affirmed the broader industry trend of strong, growing interest in the private markets among non-institutional investors”.

Around 70 per cent of advisers said they plan to increase clients’ allocation to the asset class compared with 2023, citing performance and diversification as the top reasons for the increasing interest in private markets.

However, the respondents noted that there is a need for education on the asset class among clients.

While 97 per cent of advisers reported that they had either advanced (55 per cent) or intermediate (42 per cent) understanding of private markets, 50 per cent of advisers rate their clients’ knowledge about private markets investments as beginner or having little to no knowledge of the asset class.

Just 4 per cent of advisers rated their clients’ knowledge about private markets as advanced or well versed in the asset class and confident in talking about private market details, trends, and products.

“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.”

Despite this lack of knowledge, the survey found that the vast majority of clients are very (41 per cent) or somewhat interested (45 per cent) in the asset class and open to learning more.

Advisers also noted education, thought leadership, and events 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 advisors and clients achieve their goals,” said Scott Thomas, Hamilton Lane’s head of private wealth, Australia.