Over 70% of wealth investors intend to allocate between 5-20% of their portfolios to private markets over the next five years, according to a recent survey by BlackRock.
This is a sizable leap from the two-thirds of wealth investors who have under 5% of their portfolios in private equity currently.
Fabio Osta, head of BlackRock’s alternatives specialists team in EMEA wealth, said “the era of no allocation to private markets is expected to come to an end” as the value of private assets jumps from $13trn today to $20trn by 2030.
“This will require a significant increase in allocations,” he added. “This growth will increasingly come from the wealth channel, in addition to institutional investors, as we continue to make investing in private markets easier and more accessible for a broader range of investors and head towards the potential 50/30/20 portfolio of the future.”
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Mass affluent investors (worth over $5m) and high net worth individuals (worth between $5m to $30m) are expected to drive the most investment into private markets over the next five years, with private equity, infrastructure and private credit projected to deliver the highest returns.
These are areas BlackRock has increased its exposure to over the past year, most recently acquiring private credit specialist HPS Investment Partners for $12bn in December.
The firm expects private credit to grow above consensus forecasts from around $2trn today to $4.5trn by 2020.
Amanda Lynam, head of macro credit research at BlackRock, said: “As the private credit market has grown into a sizable, scalable, stand-alone asset class, it has broadened its addressable markets of investors and borrowers.
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“This has meant that private credit is no longer reserved for niche financing solutions, or exclusively for lending to smaller, middle market borrowers.”
Lynam also highlighted the asset class looks set to provide some stability in times of uncertainty, which could provide some welcome defensiveness in stormy markets.
“In past episodes of market volatility, private credit has shown an ability and willingness to step in to provide financing to a wide range of borrowers,” she added.
“Indeed, we expect some borrowers will choose private financing if/when capital is less available (or access is more uncertain) in public markets.”
This story was written by our sister title, Portfolio Adviser
