Wealth managers eye greater allocation to private markets but regulation remains a hurdle

Wealth managers are considering moving away from the traditional 60/40 portfolio in favour of a greater allocation to private assets, a survey by Carne Group found. (Source: Investment Week)

Around 44% of wealth managers said they expect adopting a portfolio with a 20% allocation to private markets to “deliver greater returns over the long term”.

When asked about specific asset classes, wealth managers identified real estate, venture capital, infrastructure, and private debt as the sectors with the highest allocation forecasts.

This is due to Carne Group’s projection of a 62% growth in global private market assets, from the current $13 trillion to $21 trillion by 2030.

Moreover, the introduction of innovative structures like the LTAF in the UK and ELTIF in the EU is expected to boost investment in private markets by wealth managers, according to the survey’s respondents.

Despite the fact that the vast majority of investment managers in both the UK and the US are already raising capital for private funds in Europe – 94% and 88%, respectively – regulation remains the primary challenge.

US managers stated that EU regulations regarding private assets are “more complex” than those in the US, and several anticipated that these regulations will become even stricter in the future.

Likewise, UK managers identified the regulatory environment as the biggest challenge to successful fundraising and fund launches, with nearly 70% predicting a 25% to 50% increase in spending on resources dedicated to managing compliance.

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