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The Shift Towards Private Markets

According to a recent survey conducted by Hamilton Lane, a prominent player in private markets investment management, private market allocations are rapidly transforming the landscape of financial advising. Conducted among over 300 investment professionals, this annual global report has illustrated that nearly one-third (30%) of advisors anticipate allocating 20% or more of their client portfolios to private markets in 2025. Furthermore, 29% of respondents expressed intentions to invest at least 10%, consolidating a total of nearly 60% planning to commit 10% or more. This marks a notable increase of 15% from the previous year’s survey, reflecting a shift in advisors’ comfort levels and growing public interest.

Surge in Infrastructure Investment

One of the standout findings of this survey is the burgeoning interest in private infrastructure investments. Nearly 48% of advisors surveyed indicated plans to increase exposure to this sector, underscoring a broader trend in the growing acknowledgment of private infrastructure's potential benefits. These advantages include high entry barriers, sustainable cash flows, competitive total returns, promising income yields, and portfolio diversification. While infrastructure led in interest, private equity and private credit continue to be focal strategies vying for significant portions of overall portfolio allocations.

A More Attractive Investment Landscape

The attractiveness of private markets can't be overshadowed, with more than three-quarters (76%) of surveyed advisors believing that clients perceive private markets as offering higher rewards compared to traditional stocks and bonds. The two primary motivations driving clients toward private investment are performance and diversification, remaining consistent with trends observed in past surveys. The importance of these factors cannot be overstated, as they consistently outshine other considerations, such as sector exposure or liquidity.

Addressing the Knowledge Gap

While advisors have significantly enhanced their understanding of private markets – with 63% evaluating their knowledge as 'advanced,' an increase from 55% in the last year – a knowledge gap still exists among many respondents. Hamilton Lane has responded to this need through educational initiatives like their Knowledge Center and weekly insights designed to elevate advisor and client knowledge on private markets, aiming to aid in their investment endeavors.

Additional Insights from the Survey

A substantial driving force behind advisors' inclusion of private market investments is the competitive advantage they believe it offers in attracting and retaining clients; a noteworthy 70% stated that facilitating client investment in private markets fosters stronger relationships.

Interest in private markets spans various age demographics, with Gen Xers leading at 94%, followed by Millennials (89%), and Baby Boomers (77%). The interest from younger generations, such as Gen Z and those over 75, while present, is notably lower at 59% and 43%, respectively.

Geographic trends emerged, revealing that clients in the Asia Pacific (51%) and the Americas (48%) displayed the highest levels of 'very interested' sentiments toward private markets. Evidently, knowledge correlates strongly with interest levels, as the regions showcasing advanced or intermediate knowledge also reported the greatest enthusiasm for private market investments.

Future Prospects

Steve Brennan, Hamilton Lane’s Head of Private Wealth Solutions, shared insights on the survey findings, expressing optimism regarding growing enthusiasm for private market investments. "Just a few years ago, a goal of seeing 60% of advisors planning to allocate 10% or more to private markets would have been unimaginable. This reflects an enhanced understanding of wealth-generating opportunities available in the private markets. We foresee continued growth in infrastructure investments and aim to increase the number of investors with advanced knowledge of private markets. Hamilton Lane is dedicated to providing high-quality investment avenues while augmenting investor comprehension of this asset class."

In conclusion, the Hamilton Lane survey paints a promising picture for private market allocations among advisors in 2025, underscoring a significant evolution in financial strategies and investment landscapes. As the understanding of these assets deepens, the potential for both advisors and clients to achieve enhanced portfolio performance grows ever greater.