2020 Size of the Markets — HNWI vs. Pension Funds
2020 private markets nav by investor
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Cheap and simple public holdings are not enough to meet your investment return target in the future.
Democratization of the Private Markets
We are hearing a lot about the “democratization” of private markets. That term is code for allowing high-net-worth investors to invest in illiquid assets, particularly private equity and private credit. We’ll join our cynical readers for a minute and offer that whenever we hear something as highbrow as “democratization,” (generally uttered only by those who stand to profit mightily by that “democratization”) we are a little suspicious. Let’s tell it for what it is: The industry wants access to the huge piles of money held by individual investors. It’s that simple. “Democratization” just sounds so much more egalitarian and fair.
Cynicism aside, it is an inevitable movement. The timing and scale may be uncertain, but it will happen. The watershed moment from our perspective was when Vanguard, long viewed as championing a portfolio that outperformed because it was simple and cheap — X% public stock and Y% public bonds — came out and said, “Actually, you need some proportion of your assets in private markets.” Cheap and simple public holdings are not enough to meet your investment return target in the future.
Let’s put this current wave in perspective. While the headline number of nearly $2 trillion in private assets held by high-net-worth investors sounds huge, it includes massive family offices and ultra-high net worth investors. We are not really talking about “retail” or “democratization” the way those words are generally used. We are a long way from a world where everyone has access to private markets.
It wouldn’t, however, take much of a shift in allocation to private assets to increase dramatically the amount of capital flowing into the private markets. A 1% increase in high-net-worth allocation increases the size of private markets by 10%. This is why the industry is now talking about fairness and democratization.
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Cheap and simple public holdings are not enough to meet your investment return target in the future.
It wouldn’t, however, take much of a shift in allocation to private assets to increase dramatically the amount of capital flowing into the private markets. A 1% increase in high-net-worth allocation increases the size of private markets by 10%. This is why the industry is now talking about fairness and democratization.
2020 Size of the Markets — HNWI vs. Pension Funds
Let’s put this current wave in perspective. While the headline number of nearly $2 trillion in private assets held by high-net-worth investors sounds huge, it includes massive family offices and ultra-high net worth investors. We are not really talking about “retail” or “democratization” the way those words are generally used. We are a long way from a world where everyone has access to private markets.
2020 private markets nav by investor
Democratization of the Private Markets
We are hearing a lot about the “democratization” of private markets. That term is code for allowing high-net-worth investors to invest in illiquid assets, particularly private equity and private credit. We’ll join our cynical readers for a minute and offer that whenever we hear something as highbrow as “democratization,” (generally uttered only by those who stand to profit mightily by that “democratization”) we are a little suspicious. Let’s tell it for what it is: The industry wants access to the huge piles of money held by individual investors. It’s that simple. “Democratization” just sounds so much more egalitarian and fair.
Cynicism aside, it is an inevitable movement. The timing and scale may be uncertain, but it will happen. The watershed moment from our perspective was when Vanguard, long viewed as championing a portfolio that outperformed because it was simple and cheap — X% public stock and Y% public bonds — came out and said, “Actually, you need some proportion of your assets in private markets.” Cheap and simple public holdings are not enough to meet your investment return target in the future.
Fundraising
Definitions and Disclosures
