Pitchbook’s Navina Rajan is estimated to increase by 30% over the next five years to reach $24 trillion.
With the increasing popularity of the private market, and changing product innovation and regulations have led investors to gain more access to market sectors.
Speaking on the panel of the evolving market structure that shapes the investment vehicle, Rajan, senior analyst at EMEA private capital at Pitchbook, says that private capital is currently estimated to be worth $19 trillion worldwide, growing by about seven times over the past decade and is expected to increase by 30% over the next five years. The majority of this lies in private credit and private debt, a Pitchbook study found.
Markets need to take stress tests
The convergence of public and private markets was an important topic of discussion at conferences. In previous discussions by CIOsThe panelists said that clients’ interest in private products is strong, but liquidity is not where it should be and the market has not yet been stress-tested.
Also called Private and Public Market Convergence in the Panel, Neil Mehta, head of the new market for alternative asset manager Apollo.
“It forces us to rethink public and private, what is safe and what is dangerous. Many of us have gone through multiple cycles. We don’t necessarily have to be safe. The public doesn’t necessarily have to be liquid.
He added that the industry is at the start of product renaissances beyond funds, ETFs, LTAFS and mutual funds.
State Street recently partnered with Apollo for a private credit ETF. Mehta noted that two key issues are fluidity and complexity. That’s why he believes there should be an open architecture marketplace where all dealers interested in participating can copy ETF playbooks.
“I think that simple experience (purchasing an ETF) is important for the client as well.”
Pascal Nguyen, head of Portfolio Management EMEA for BlackRock’s Alternative Portfolio Solutions, added that while the new vehicle has a lot of promise, it also comes with a lot of work and complexity. This underscores the need to focus on strategic asset allocation, implementation, and liquidity needs, whether it is an ETF or LTAF with direct investment or capital structure. Paying multiple funding fees can be a performance drug.
“If you can give one disclaimer, it’s your client’s education. Under the hood, you have private investments and they follow the physics of private investment. It’s a long holding period. They’re really good, but they take a long time.”
Vikram Bhandari, head and CIO of Schroders Capital Solutions, added that practicality is costly and that this cost could be liquid. “There’s something for everyone. It’s not perfect and one size may fit everything, but the market has come a long way and regulators have come a long way.”
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