Asset managers see potential in private markets but struggle to implement the asset class

Private markets are gaining momentum, but despite recognizing the opportunities, global asset managers are finding it difficult to access this asset class due to its associated challenges.

The CFA Asset Manager Survey found that while asset managers like the concept of private markets for investment opportunity and diversification benefits, they face several challenges in implementing them.

As asset managers become increasingly aware of the challenges and opportunities presented by private markets, opinions remain divided on whether they serve as an opportunity or a challenge for current business practices.

While 37% of asset managers said private markets are more of an opportunity for their current business practices, 29% consider them a challenge. However, US asset managers are notably more positive, with 45% considering private markets to be an opportunity.

For those who view private markets as an opportunity, 43% cited diversification of offerings, 46% pointed to improved investment performance and 32% reported the positive impact on long-term positioning.

According to the CFA, the benefits of investing in private markets for diversification are clear, as privately owned companies represent a substantial portion of the economy. This enables investors to diversify their portfolios and access opportunities across a much wider range of sectors than would be possible through investments in public markets alone.

However, private markets also present several well-known issues, such as a lack of transparency around performance and governance, limited fungibility of investments and informational gaps.

As a result, asset managers who view private markets as challenging often point to difficulties in integrating these assets into their offerings and liquidity concerns as their top challenges. These issues were further exacerbated by a lack of expertise in managing these assets.