In a remarkable shift within the investment landscape, private equity (PE) funds have garnered an unprecedented 50.5% of private capital fundraising so far this year.
This surge is detailed in the inaugural report from Barclays Private Bank, titled Forging New Paths: How private investors are capitalising on the evolution of private markets, which highlights the robust appeal of PE and venture capital (VC) among private wealth investors as interest in private markets continues to soar.
The report shows that, despite turbulent economic conditions globally, PE funds have successfully captured nearly $2 trillion in fresh capital since the beginning of 2023, contributing to total assets under management globally reaching a staggering $14.7 trillion in 2022—projected to increase to $19.6 trillion by 2028. This impressive feat underscores the resilience and growth potential that these funds exemplify.
According to the report, there is a notable shift among family offices and high-net-worth individuals (HNWIs) who are increasingly mirroring institutional investors' strategies. This adaptation reflects a growing recognition of the lucrative opportunities embodied in private markets, as they seek to enhance their portfolios beyond traditional stock-market investments.
Barclays Private Bank head of Private Markets Shenal Kakad says: "Our report underscores the evolving sophistication of private wealth investors, who are increasingly adopting institutional strategies in their pursuit of higher returns and portfolio resilience. We are also seeing growing demand from clients looking to make private market allocations based on their desire to not only capture higher returns but also to align with their personal values or global trends.
The report reveals that both PE and VC have delivered strong historical returns. PE funds from vintages between 2011 and 2022 have outperformed the S&P 500, while VC funds, despite their inherent volatility, garnered an impressive 11.8% internal rate of return (IRR) over 15 years.
The report says the selection of fund managers plays a crucial role in this success as recent data indicates that more than 80% of new PE dollars raised have been secured by experienced managers, a figure that has risen to 88% this year.
Family offices are not only increasing their investment in private markets but diversifying their allocations to capture potentially higher returns while aligning their investments with both personal values and global trends. In doing so, they are moving away from conventional portfolios and exploring more sophisticated asset combinations that include private equity and venture capital strategies, it said.
However, as the private market landscape evolves, the dynamics of angel investing have shifted markedly. HNWIs are gravitating towards more established and traditional channels, steering away from direct angel investments in favour of opportunities that involve more mature companies through funds or direct investment avenues.
Moreover, while VC continues to exert a dominant influence on private wealth portfolios—accounting for nearly half of all private capital fund commitments over the past decade—the number of VC funds actively raising capital has diminished, presenting investors with unique challenges and opportunities to maintain their exposure to this dynamic asset class, the report finds.
“For high net worth individuals and family offices the opportunities within private markets are significant, but these markets are complex,” Kakad cautioned. “Identifying the right opportunities requires expert guidance, coupled with deep knowledge of fund structures.”
Barclays Private Bank CEO of South Africa and marketing head of Africa Amol Prabhu says that South African family offices are increasingly engaging with private markets.
“We are increasingly seeing South African family offices take a particular interest in Private Markets. For some it is a diversification play outside of their core strategy, for others it is central to their investment strategy”.
* Maleke is the editor of Personal Finance.
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