Asset managers looking to private wealth for fundraising, Preqin report says
29 March 2023 UK
Image: bongkarn/stock.adobe.com
An increasing number of asset managers are raising capital from the private wealth industry as opposed to institutional clients, according to a recent report from Preqin.
The publication, entitled ‘Fundraising from Private Wealth: A Guide to Raising Capital’, is the first installment of a series of private wealth industry updates from Prequin’s Research Insights team.
Larger fund managers, such as KKR and Apollo Global Management, are beginning to shift their fundraising focus to the private wealth space, the company says. Others, such as Blackstone, have established dedicated private wealth teams.
High minimum investments, lack of access to appropriate fund managers and administrative difficulties have generally kept alternative investment allocations from individual investors below five per cent, Preqin reports. However, more ‘amenable’ regulation across the globe is starting to open up private markets to private wealth while maintaining investor interest protection.
The US has led this change, with Preqin predicting that other markets will follow. The report adds that although private market access may improve investment outcomes, risks around the approach must be fully taken into account.
One reason for the shift is that investors are beginning to reach their long-term strategic asset-allocation targets, Preqin says, and are now facing economic headwinds. Although global private capital has annually raised more than a trillion dollars from institutional investors for the past several years, this trajectory is expected to slow to a 3.57 per cent compound annual growth rate over the next five years. This is significantly lower than the 11.7 per cent rate seen between 2015 and 2021.
Another factor is the increasing number of companies remaining private for longer, with value perhaps being created outside of public markets.
Cameron Joyce, senior vice president and deputy head of research insights at Preqin, comments: “Most fund managers are so far only scratching the surface compared with the potential that the private wealth space offers. We are seeing larger fund managers leverage scale and their brand to raise capital directly from high net-worth individuals. However, the emergence of tech-driven intermediaries in the space promises to allow a much wider array of fund managers to diversify their investor base.”
The publication, entitled ‘Fundraising from Private Wealth: A Guide to Raising Capital’, is the first installment of a series of private wealth industry updates from Prequin’s Research Insights team.
Larger fund managers, such as KKR and Apollo Global Management, are beginning to shift their fundraising focus to the private wealth space, the company says. Others, such as Blackstone, have established dedicated private wealth teams.
High minimum investments, lack of access to appropriate fund managers and administrative difficulties have generally kept alternative investment allocations from individual investors below five per cent, Preqin reports. However, more ‘amenable’ regulation across the globe is starting to open up private markets to private wealth while maintaining investor interest protection.
The US has led this change, with Preqin predicting that other markets will follow. The report adds that although private market access may improve investment outcomes, risks around the approach must be fully taken into account.
One reason for the shift is that investors are beginning to reach their long-term strategic asset-allocation targets, Preqin says, and are now facing economic headwinds. Although global private capital has annually raised more than a trillion dollars from institutional investors for the past several years, this trajectory is expected to slow to a 3.57 per cent compound annual growth rate over the next five years. This is significantly lower than the 11.7 per cent rate seen between 2015 and 2021.
Another factor is the increasing number of companies remaining private for longer, with value perhaps being created outside of public markets.
Cameron Joyce, senior vice president and deputy head of research insights at Preqin, comments: “Most fund managers are so far only scratching the surface compared with the potential that the private wealth space offers. We are seeing larger fund managers leverage scale and their brand to raise capital directly from high net-worth individuals. However, the emergence of tech-driven intermediaries in the space promises to allow a much wider array of fund managers to diversify their investor base.”
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