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The UK’s largest wealth managers are preparing to sell private markets products to their retail customers, as investment groups battle to maintain their relevance with savers and the importance of public markets dwindles.
Wealth managers such as RBC Wealth Management, Evelyn Partners and Quilter Cheviot told the Financial Times they would soon be able to offer greater access to private markets — ranging from private equity to private credit and infrastructure investments — to high net-worth clients with about £500,000 to more than a million pounds to invest.
Some of the UK’s biggest do-it-yourself investment sites that sell funds directly to consumers, such as Hargreaves Lansdown and AJ Bell, are also considering selling these products to sophisticated customers who have smaller amounts to invest, according to people familiar with the plans.
Matt Ennion, head of fund research Quilter Cheviot, said: “If we’re trying to differentiate ourselves, we need to consider private assets. For us, it’s an area we should probably allocate more to, but how?”
Some managers said they faced operational issues in making the shift to private assets, given their current focus on funds that price every day rather than every few months. Other groups raised concerns about the ability to withdraw their clients’ cash. DIY customers will also have to sign documents to say they understand the risks.
Private capital firms, including Blackstone, Apollo, Ares, EQT and Partners Group, have held talks with wealth managers about overcoming these hurdles, according to people familiar with the discussions. One global private capital firm said it was in the process of getting regulatory sign-off on a retail product for the UK, while another said it had plans to launch one. The private capital groups declined to comment.
Private capital firms are struggling to raise money from institutions and some are turning instead to retail clients. Another large private capital firm said the UK was “a huge savings market, we want to be doing more here . . . it’s a market we’re absolutely willing to invest in and hoping to do more over time”.
The growing interest in this area from wealth managers comes as the UK’s listed equity market shrinks, with companies being taken private, bought by rivals or choosing to list in the US.
Private assets have until recently been the preserve of ultra-rich investors, but wealth managers said the advent of a new structure, the Long Term Asset Fund, could more easily allow them to invest on behalf of more of their customers.
LTAFs are a type of “evergreen” semi-liquid fund offering a mixture of private assets, which can be harder to sell quickly, and those that are easier to offload, such as money market funds or listed equities. In the UK, the Investment Association devised the structure in consultation with industry experts, following similar moves in Europe.
However, the new vehicle has been slow to catch on. There are 23 approved LTAFs in the UK, according to the Financial Conduct Authority.
In Europe, there are more than 150 of the equivalent product, according to Morningstar Direct. Financial advisers in Europe were more familiar with the product, meaning uptake among savers was ahead of the UK, some of the private capital firms said.
These types of semi-liquid funds have a withdrawal notice period of at least 90 days in the UK. They were initially sold to defined contribution schemes, but the UK’s financial regulator has allowed them to be sold to certain retail investors who are willing to take on more risk.
David Storm, chief investment officer of RBC Wealth Management, said the firm was “exploring an increased allocation to private markets where the strategy fits the client profile”.
He said liquidity risk — the inability to sell assets at a fair price — was “absolutely” a concern but noted that certain investors could sacrifice some liquidity if holding the investment for a long time.
Ennion at Quilter Cheviot said: “There are potential issues on the operational side, with compliance — are these funds suitable for everyone? There’s also scepticism whether they can offer liquidity when you want it. They’ve not really been tested.”
