Wealth Managers Push Private Assets to Mainstream Investors Amid Return Hype and Risk Concerns

The Private Asset Gold Rush

Wealth managers across Europe are reportedly engaged in an intense competition for investor capital, with private assets becoming their weapon of choice, according to industry reports. Asset managers see a golden opportunity to sell private equity, credit and infrastructure investments to clients who previously focused exclusively on public markets through newly designed fund structures.

The Private Asset Gold Rush
New Fund Structures Lower Barriers
The Allure of Strong Returns
Rising Concerns and Hidden Risks
Volatility Laundering Debate
Liquidity Concerns and Historical Precedents
Fee Structures and Manager Incentives
Regulatory Shifts and Market Expansion
Due Diligence Challenges

Sources indicate that while the super-rich typically allocate over 25% of their portfolios to private assets, mainstream investors with less than $50 million have historically faced prohibitive minimum investment thresholds. This barrier is now crumbling with the emergence of regulated vehicles like Eltifs in Europe and LTAFs in the UK, which analysts suggest represent the “democratisation” of private assets.

New Fund Structures Lower Barriers

Recent regulatory developments have created semi-liquid fund structures that reportedly allow monthly investments while restricting redemptions to quarterly intervals at best. The latest Eltif versions have eliminated minimum investment requirements entirely, while UK LTAFs maintain a £10,000 threshold, making private assets accessible to a broader investor base.

Industry data from Amundi reportedly shows significant growth in these vehicles, with Eltifs in wealth portfolios expanding to €25 billion by June this year, representing a 56 percent increase since December 2024. The UK equivalent, LTAFs, have grown by 46 percent to €8 billion over the same period, according to the analysis.

The Allure of Strong Returns

The push toward private assets comes amid impressive historical performance figures. According to MSCI Private Capital Solutions, private equity has generated net annualized returns of nearly 13 percent over 20 years, outperforming the Russell 3,000 index of US public equities, which delivered 11 percent annualized returns according to Bloomberg data. Private credit has reportedly offered returns below 9 percent but still outperformed high-yield bond indices by approximately two percentage points annually.

Double-digit returns from private investments have created some of the world’s most successful private companies, including OpenAI and SpaceX, making private assets increasingly attractive to ordinary investors experiencing what some describe as “Fomo” – fear of missing out.

Rising Concerns and Hidden Risks

Despite the attractive returns, analysts suggest several red flags are emerging in private markets. The rapid collapse of highly leveraged US auto parts group First Brands this month, with approximately $12 billion in debt, reportedly sent shivers through leveraged loan and private credit markets.

Bank of England governor Andrew Bailey reportedly drew parallels with practices before the 2008 financial crisis, telling Parliament that “alarm bells” are ringing over risky lending in private credit markets. Some industry veterans believe the best opportunities in private assets may have passed.

“Recommending private assets now is like showing up Saturday for last Friday’s train,” quipped the head of a multibillion-dollar Chicago family office, who suggested the rush to open retail access to private assets might signal a market top.

Volatility Laundering Debate

A contentious debate has emerged around how private asset returns are calculated and presented. According to financial research provider Preqin, private equity generated annualized gains of 14 percent over 15 years with volatility slightly above 6 percent—less than half that of major public market indices.

However, MSCI reportedly cites that private asset returns can rely on “smoothing” rather than actual market prices, with some analysts questioning the practice. Peter Hecht of hedge fund AQR lamented what he called “volatility laundering,” partly due to data smoothing, suggesting prices should be “marked more conservatively—a level where one could actually sell it.”

Liquidity Concerns and Historical Precedents

The semi-liquid structure of these new funds presents particular concerns, according to risk analysts. The 2019 collapse of Neil Woodford’s Equity Income fund serves as a cautionary tale—when the fund increased investments in unlisted and illiquid assets, retail investors found themselves unable to withdraw their money from what had been marketed as a daily liquidity fund.

Goldman Sachs’ Kristin Olson emphasized the need to educate clients that “quarterly liquidity might not happen right away,” while AQR’s Hecht added that many investors don’t fully understand that “the manager is only committing to liquidity if possible.”

Fee Structures and Manager Incentives

Wealth managers face significant incentives to promote these products, according to industry observers. Oliver Wyman notes that cost-to-income ratios persist above 70 percent in wealth management, well above most banks and asset managers, suggesting inefficient operating models.

Data from Morningstar indicates that Eltifs and LTAFs typically charge annual management fees of approximately 2 percent plus performance and other sales fees—potentially double those of standard publicly listed funds. Financial consultant Lubasha Heredia of Oliver Wyman described private assets as “a higher margin product” that can help wealth managers “justify their fees.”

Regulatory Shifts and Market Expansion

Some governments are reportedly encouraging investment in illiquid private assets like infrastructure with lighter regulatory touch. Meanwhile, the UK’s Financial Conduct Authority plans to change frameworks to qualify individual investors as professional clients, which would exempt them from extra protections afforded to retail consumers.

Major private equity groups see Europe’s open-ended private asset funds as crucial for market expansion. Apollo’s head of Emea distribution, Véronique Fournier, stated they have “pretty ambitious goals” for fundraising from wealth managers over the next five years, though industry executives stress the reputational risk if capital is deployed too quickly without delivering promised returns.

Due Diligence Challenges

Wealth advisers acknowledge increasing difficulty in navigating the crowded private asset landscape. Matthew Powley of Stonehage Fleming, which manages $28 billion in assets, noted that “with so much capital targeting the space, it creates a lot of noise. It makes our job harder and thus more important.”

Despite the challenges, consultancy Oliver Wyman predicts that investors with $300,000 to $50 million could quadruple their private asset holdings to $2.2 trillion by 2029, suggesting the private asset push represents both substantial opportunity and significant risk for mainstream investors entering this complex market.