Why is everyone trying to sell your assets now?

A battle is taking place in Europe for the savings of wealthy investors.

Asset managers see a golden opportunity to sell private assets – stocks, credit and infrastructure – to clients who previously invested only in publicly traded stocks and bonds, through new types of funds.

The wealthy – at least those with more than $50 million to invest – probably hold more than a quarter of their portfolios in private assets. But those with less found it difficult to meet the minimum investment thresholds. yet.

In Europe, recent open-end funds have evolved into the European Long-Term Investment Fund (Eltif), designed to channel individuals’ capital towards long-term projects and companies. In the UK, these funds are known as LTAFs (long-term asset funds). Both are regulated and considered part of the “democratization” of private assets.

These funds have a semi-liquid structure, typically allowing for monthly inflows, but only quarterly redemptions, at best. For the latest Eltifs, there is no minimum investment, while the minimum investment for LTAFs in the UK is £10,000.

LTAFs expanded to €25 billion by June this year, up 56 per cent since December 2024. Their UK equivalent, LTAFs, grew 46 per cent to €8 billion over the same time period, according to data from Amundi.

Meanwhile, returns from private investments have led to the creation of some of the world’s most successful private companies, such as OpenAI and SpaceX. It is not surprising that ordinary investors turn their heads.

But being large does not necessarily make private collections safe investments. the Rapid collapse This month, highly leveraged US auto parts group First Brands, which has about $12 billion in debt, sent shivers through the leveraged and private credit markets.

This week, Bank of England Governor Andrew Bailey drew a comparison with practices leading up to the 2008 financial crisis, telling the House of Lords Financial Services Regulatory Committee that… “Alarm bells” There are reports of risky lending in private credit markets.

Some in the industry believe that this period is the rosiest Maybe it passed For private assets.

“Recommending private assets now is like showing up for last Friday’s train on Saturday,” jokes the head of a multibillion-dollar family office based in Chicago. “The rush to open up (higher) retail into the (private assets) space is a harbinger of the top of the market.”

Speaking at a Financial Times conference this month, Mark Nachman, head of Goldman Sachs’ money management business, said the rush of retail money into private assets was pressuring fund managers to deploy capital quickly, increasing the risks of buying bad assets.

However, many wealth managers believe that private assets not only provide good returns over a long period, but can diversify investment portfolios, reducing risk without compromising performance. Wealth managers might say that the fact that these funds also tend to charge much higher fees, perhaps double those charged by standard exchange-listed funds, is a happy coincidence.

“It is (certainly) as important for the wealth management industry as it is for alternative asset managers,” believes Lubacha Heredia, partner at financial advisory firm Oliver Wyman. “It’s a higher-margin product…something that can help them justify their fees.”

The question is: Are these new products suitable for mainstream investors who may not fully understand the risks?

In many respects, retail investors They fill the shoes of those who have already opted out. Private equity funds in particular have sought new sources of capital as demand from their institutional clients has waned in recent years.

Part of this is due to the inability to pay sufficient distributions to these limited partner clients. A decline in IPO and deal activity between 2021 and 2024, especially in the US, has caused a capital bottleneck.

In the year to June 2025, private equity funds raised $592 billion, Minimum amount In seven years, according to a recent article in the Financial Times.

Stonehage Fleming manages $28 billion in assets. The head of private equity, Matthew Pauley, has a lot of visiting fund marketers promoting these products. “It has become more crowded, yes. It has been a more exclusive business… With so much capital targeting this space, it creates a lot of noise. It makes our job more difficult, and therefore more important.”

The potential market for these vehicles is large: they target investors with investments ranging anywhere from $300,000 to $50 million. Consulting firm Oliver Wyman predicts that by 2029, this group could quadruple its holdings of private assets to $2.2 trillion.

Wealth advisors believe there is a huge opportunity for their clients, many of whom were unable to take advantage in the past because they had less capital to commit to.

Some consider private assets a useful way to diversify your investment portfolio, if you are investing for the long term. “The correlations (with public markets) are low,” says Maya Bhandari, who oversees Neuberger Berman’s multi-asset investments in EMEA.

Others see it as a way to benefit from some investment returns that are better than expected returns, given the level of risk.

“There are fewer companies in the public space,” says Christine Olson, global head of alternatives for Goldman Sachs’ wealth business. “If you’re a wealthy investor without exposure to the private sector, you’re missing out on an opportunity.”

For some investors, the attractive returns certainly brought a feeling of FOMO. Over 20 years, private equity has generated a net annual return of about 13 percent, according to MSCI Private Capital Solutions. This compares favorably with a broad index of US public stocks, the Russell 3000, which delivered an annualized return of 11 percent, according to Bloomberg data. Private credit supply rose less than 9 percent over the same period, according to the MSCI index. This beats the Bloomberg US high-yield bond index over that period by two percentage points annually.

But a wealth advisor will know that it is the risk-adjusted returns that matter most. High volatility means that you have a greater chance of suffering a loss only when you need to withdraw your money for any reason, and you are likely to sell your investment at the worst time.

Erin Osman, chief investment officer at Arbuthnot Latham, stresses caution. “I have seen a clear trend towards LTAFs and Eltifs by many funds that did not have a lot of experience and exposure to this space,” he says.

Although the long-term returns data make a good case For private equity and credit investing, finding evidence of the promised diversification benefits while not forcing investors to take on more risk may be elusive.

But there is some data that supports the idea. According to Preqin, a company that provides financial research, annual gains from private equity over the past 15 years have been 14 percent, with annual volatility of just over 6 percent — the latter less than half the Standard & Poor’s 500, or the much broader Russell 3000 Market Index. For private credit, long-term returns were 9.5 percent, but with roughly half the volatility.

This low volatility raised some eyebrows. MSCI pointed to the fact that private asset returns can be based on “smoothing” (or average over a certain period) rather than actual market prices. It is preferable not to provide volatility data for this reason. Preqin said his data contains an element of heterogeneity.

It is a controversial area of ​​discussion. Commentators such as Richard Innes, a former pensions investment consultant, have questioned the use of delayed returns on private assets and how this can be achieved. Reduces data volatility. This does not mean that private equity and credit are necessarily bad investment choices, but that the amount of bet in your investment portfolio should be less.

“I think people underestimate the risks to private capital,” laments Peter Hecht, leader in the portfolio solutions group at US hedge fund AQR. There is a “volatility washout” mirage partly due to data smoothing. “Prices and asset values ​​should be set more conservatively – the level at which (one) can actually sell.”

Often, proponents of newer open-end private equity funds emphasize the need to educate clients about illiquid assets. This is especially true of newer semi-liquid compounds. The collapse of Neil Woodford’s Equity Income Fund in 2019 came as investments in unlisted and other illiquid assets increased. When retail investors tried to withdraw their money from the open-ended fund — which promised daily liquidity — and were unable to do so, the fund was suspended. Ultimately, 300,000 people were left out of pocket.

“You hope investors (and advisors) understand that quarterly liquidity may not happen right away, (so) we need to work on the situation as a feature of the product,” says Goldman Sachs’s Olson, who says this is her team’s focus.

However, “the manager is only committed to liquidity If possible. . . “I think many investors don’t fully understand this,” adds AQR’s Hecht. “The message heard is that liquidity is almost guaranteed.”

So what other incentives might wealth managers have to sell these new PE funds to a new audience?

Clearly, wealth management is an expensive business. Cost-to-income ratios are still above 70 per cent, much higher than most banks and asset managers, suggesting inefficient operating models, notes Oliver Wyman.

As a result, wealth managers will be attracted to growth in a higher-fee product, such as Eltifs and LTAFs, which have annual management fees of about 2 percent on top of performance fees and other sales fees, according to data from Morningstar.

Some governments are encouraging more investment in illiquid private assets such as infrastructure, with a lighter touch on regulation.

“If the government encourages investors to invest in long-term private investments, this can provide some comfort and cover,” says Leonard Ng, a partner at law firm Sidley, which specializes in financial regulatory issues. “The reality is that the wealth manager may receive higher margins and fees as a result.”

Furthermore, the UK Financial Conduct Authority is planning to change the framework to qualify individual investors as professional clients. These customers are exempt from the additional protections that apply to retail consumers.

Major private equity groups see open-end private equity funds in Europe as important for accessing a new market. “At Apollo, we have very ambitious goals in terms of what we want to raise (from wealth managers) over the next five years,” says Véronique Fournier, head of EMEA distribution at Apollo.

But it and Others In her industry she stresses that there are reputational risks if private asset managers rush to deploy any capital too quickly and cannot deliver the promised investment returns.

“As private market investing is still an alpha phase, the question is whether these instruments offer the potential to outperform,” says Daniel Mattson, head of private assets at Lombard Odier. “We have treated this area with caution.”