Almost two thirds of advisers have never invested in private markets, with 57 per cent putting this down to the increased burden of regulation.
Just 2 per cent of advised client assets were invested in the asset class, a new report found.
The report, commissioned by Aviva Investors, Schroders and Franklin Templeton, found risk aversion put advised clients off investing in private markets.
The report, Private Market Assets: Opportunities and barriers in traditional investment, found just 20 per cent of advisers have clients invested in private market assets.
In this group, the assets make up on average 17 per cent of clients’ portfolios. When this is averaged out across all clients it means just 1.8 per cent of their assets are allocated to private markets.
Smera Ashraf, head of global wealth UK at Aviva Investors said: “This is despite the fact that there are real benefits to private market asset investing, in particular as a source of diversification and as well as supporting returns over the long-term.”
The report also found this was unlikely to change in the next year with just 15 per cent of advisers expecting to increase allocations to the asset class and 80 per cent not planning to make any changes.
Harry Reeves, head of sales, UK wholesale at Franklin Templeton, said a decrease in the number of publicly traded companies has narrowed the range of opportunities.
However, he said private equity has shown strong historical returns compared to public markets over the long-term, due to the ability to invest in younger companies.
He added: “For advisers with clients who have many years of accumulation ahead of them, incorporating private market assets is worth considering, in spite of the perceived barriers.”
Overall, 64 per cent of advisers in the study admitted they do not even raise the topic of private market assets.
The report was compiled by NextWealth and surveyed 100 advisers as well as carrying out in-depth interviews with 10 investment decision makers at advice firms and a roundtable of people involved across the process.
Emma Napier, consulting director at NextWealth called the topic “fascinating”.
She added: “Advisers know their clients and many factors are at play as to whether or not a higher risk route is right. Many advisers we surveyed feel that private markets play a more important role in clients accumulating wealth but is less of an option for the many clients who are at the decumulation stage of their investment life.”
tara.o'connor@ft.com
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