Over the past year or so, there’s been a lot of buzz around private markets.
Whether it’s private equity, private credit or infrastructure, these asset classes are no longer the exclusive domain of institutions and ultra-high-net-worth clients. They’re becoming more accessible, more productised and more relevant to the everyday adviser.
But with this shift comes complexity. Liquidity, transparency, governance and portfolio construction all become trickier. And for those of us still running paper-based model portfolios – I’m probably 50/50 between paper based and SMAs – the question becomes, “How are advisers accessing private assets?”
I’ve been using a private credit fund in our portfolio (low exposure) for the last couple of years, but that’s about as far as it goes. However, there’s a growing range to choose from in the retail space:
- Private equity: investments in unlisted companies, often via venture or buyout funds.
- Private credit: direct lending to businesses, bypassing traditional banks.
- Private infrastructure: long-term assets like toll roads or renewable energy projects.
- Private real estate: commercial or residential property outside public REITs.
These assets offer the potential for higher returns and diversification, but they do come with some trade-offs: illiquidity, complex fee structures and limited transparency.
Paper vs platform
I’ve long used paper-based model portfolios. I mostly only use them with my retirement and pre-retirement clients, or the clients who want something more bespoke. They give me flexibility, transparency and the ability to tailor advice.
I’m a big fan of SMAs, too, but I generally prefer not to use them in drawdown phases (like retirement). But as SMA usage increases throughout our industry, are we thinking about private markets and how we can get exposure? SMA plus satellites? Paper-based models?
SMAs streamline implementation and reduce admin – but they can also limit customisation. I know that for my business, we’re regularly reviewing and researching our options.
How advisers are using private markets
At recent industry events, I’ve heard advisers share how they’re:
- Allocating small percentages (5-10%) to private credit for income stability.
- Using semi-liquid private equity funds to manage liquidity risk.
- Offering private market exposure only to high-net-worth clients with long-term horizons.
In my case, I’ve started exploring platform-based retail options that offer some exposure without overhauling my entire model. In saying that, I would like to increase exposure to private equity and infrastructure, as I believe there’s strong potential with the right managers.
There’s an opportunity there to get listed shares return while remaining uncorrelated. Obviously, though, it comes with risk.
It’s all about the “how”
Private markets are clearly on a strong growth trajectory. But how we use them – and how we structure our advice delivery – will define our success over the next decade.
I’d like to put it to you, though:
- Are you integrating private assets into your portfolios?
- Have you moved to SMAs or MDAs, or are you holding the line with paper-based models? (And if so, do you have private asset exposure?)
- What’s working, and what’s not?
Let me know your thoughts.
Advisely Board
