UK Lags Behind Europe On Retail Investor Allocations To Private Markets

According to the study of 892 European fund selectors, the proportion of retail client assets currently invested in private markets now stands at 7.7% on average, just below the 9.2% institutional client weighting. 

In the UK, however, only 4% of client assets are invested in the private markets. This compares poorly to Germany, with a retail allocation to the space at 12% on average, followed by Benelux at 11% and France and Switzerland at 9% each. 

In the past year, over a quarter of European investors currently allocating to private markets, including both institutional and retail, have increased their allocations, while a fifth have decreased.

Inside Blackstone's multi-million dollar mission to democratise private markets

Among retail investors, 30% have increased their allocations, while 51% have stayed the same and 19% have decreased. In the UK specifically, only 21% have increased their exposure to the sector, the lowest increase in the region. 

Private equity is the most popular asset class among retail investors, with a net 12% of European retail allocators poised to continue increasing client exposure. When it comes to this asset class, global growth is preferred by both retail and institutional investors.

According to the survey, lack of liquidity (55%) is the main obstacle for retail investors to invest in private markets, followed by lack of transparency (44%), high fees (42%) and regulatory concerns (41%). In the UK, 73% of fund selectors pointed to lack of liquidity as the biggest issue.

Hamilton Lane: Semi-liquid private markets funds lower access barriers for retail investors

"Private market strategies have long been used by institutional investors to help reduce volatility and deliver consistent, long-term performance. However, for decades, individual investors have had limited access to similar private market opportunities," said José Cosio, managing director at Neuberger Berman. 

"Fortunately, the democratisation of the asset class continues to accelerate, with retail investors increasingly able to access private strategies."

Cosio said that the ELTIF market, which grew by more than 50% in 2022 year-over-year, could become the standard for providing European individual investors with access to private equity. 

"In the UK, the industry is increasingly embracing the new LTAF structure, which will also help to reduce barriers to entry. As UK private market allocations lag European peers, this is a welcome development," he added.

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