There’s a growing interest in alternative assets from all corners of the investing landscape, including family offices, endowment funds, insurers, financial advisors â and increasingly the super-rich , according to investment manager Juan Delgado-Moreira. “The ultra-high-net-worth are drawn to private markets and are increasing their allocations to the asset class because they offer a range of products â like senior credit, junior credit, venture capital and private equity â that have outperformed the public markets” the co-CEO of the U.S.-headquartered alternative investment firm Hamilton Lane told CNBC Pro earlier this month. “This diversity in investments allows the wealthy to enhance their returns and grow their wealth,” added Delgado-Moreira, whose firm has around $920 billion in assets under management and supervision. Last month, it closed its Hamilton Lane Secondary Fund VI with $5.6 billion in commitments . Private market assets or alternative investments are those that do not fall into the conventional categories of stocks, bonds, commodities and cash. They can include real estate, private equity, venture capital, private debt, hedge funds, digital assets, and even collectors’ items like art, jewelry and watches. Private markets are “growing fast and seeing strong returns according to their relative risk and strategy,” Delgado-Moreira said, estimating the total market value at around $15 trillion. Prequin, which provides data on the alternative assets market, says it expects assets under management to hit $23.21 trillion by 2026 . “The dollar amount does not represent the story of private markets. But the returns are coming through. It may not be as large as Nvidia , which has grown 200%, but it is still growing,” he added. However, private market investments are generally considered to be more risky and volatile with limited regulation and fewer data points to reference, unlike public markets. Alternatives have also been an asset class that only institutions, the super-rich and accredited investors can invest in. In the U.S., people need to have an income of at least $200,000 a year (or $300,000 with a spouse) to be deemed accredited investors who can invest directly in private credit or private debt. Delgado-Moreira says there are some ways for the average investor to get exposed to alternatives, however. He suggested that investors adopt 60/40 or 70/30 portfolio , but with exposure to private markets. “Having a 70/30 portfolio with a mix of public and private market-focused equity and credit is the single biggest way to add diversification and enhanced returns,” he said. Here are two ways Delgado-Moreira suggests that investors can get exposure to private markets: 1. Listed companies related to private markets He advised investors to consider listed companies in “the business of private markets management.” These include the likes of KKR and Blackstone , which invest in a range of alternatives like real estate, credit and capital markets. “My first way of investing in private markets, as a retail investor, would be to look at private market investment management firms who are themselves, public companies,” he said. “This way, there will be better understanding of the business and its performance based on disclosures that are publicly available.” 2. Listed private market funds Another way to gain exposure to the alternatives space is through private market funds which are available in some countries. These include venture capital trusts in the U.K., such as the London Stock Exchange-listed Oxford Tech 2 Venture Capital Trust, which has a market size of $696 million according to PitchBook data. In Singapore, meanwhile, the Temasek-backed Azalea Asset Management recently launched its Astrea 8 private equity-backed bonds, which are accessible to retail investors. Investing in such entities also allows investors to diversify their assets and gain exposure to different types of performance, leadership style and markets, Delgado-Moreira said.
Source Agencies
