The rapid expansion of private markets is set to accelerate further as wealth managers and private banks increasingly allocate client capital to alternative investments, according to Carne Group's chief executive.
Wealth Management Sector Emerges as Key Growth Driver
John Donohoe, who leads the global asset management consultancy, revealed that private markets could achieve 20% growth over the next three to five years. This projection significantly outpaces the anticipated expansion of public markets during the same period.
"We're witnessing a fundamental shift in investment patterns," Donohoe explained. "Wealth managers and private banks are building substantial positions in private markets, moving beyond their traditional focus on public equities and bonds."
The Carne Group CEO highlighted that this trend represents the third major wave of private markets adoption, following initial dominance by pension funds and subsequent participation from insurance companies.
Regulatory Changes and Market Evolution
Recent regulatory developments are facilitating this transition. Donohoe pointed to the UK's Long-Term Asset Fund (LTAF) structure as a crucial enabler, providing wealth managers with appropriate vehicles for client investments in illiquid assets.
"The regulatory environment has evolved to support this movement," Donohoe stated. "Structures like the LTAF create the necessary framework for wealth managers to confidently navigate private markets while maintaining compliance."
Carne Group, which oversees more than $1 trillion in assets through its regulatory hosting services, has observed increasing demand from wealth management firms seeking expertise in this complex landscape.
Future Outlook and Market Impact
The integration of wealth management capital into private markets represents more than just a temporary trend. Donohoe emphasised that this development signals a permanent structural change in how investment portfolios are constructed.
"We're not looking at a short-term phenomenon," he asserted. "This reflects a fundamental reassessment of risk, return, and diversification strategies across the wealth management industry."
The growing participation from this sector is expected to bring increased liquidity and potentially alter the risk-return profile of private market investments, creating new opportunities for both investors and fund managers.
As wealth managers continue to diversify beyond traditional asset classes, their influence on private markets is likely to grow substantially, reshaping the investment landscape for years to come.
