The desire of asset managers to attract retail investors to private markets has become a source of concern for their existing institutional investors.

Nearly two-thirds of private equity fund investors surveyed by secondary specialist Coller Capital fear retail investors’ access to private markets will negatively impact returns.

The results were published in Coller Capital’s Global Private Equity Barometer Summer 2022, which surveyed 110 investors between February 7 and March 30.

“Perhaps where the limited partners (LP) are potentially coming from is the idea that more capital in the market could drive up valuations, which could also cause managers to buy assets they wouldn’t buy. before,” said Hani El-Khoury, partner. to Coller Capital.

“Having kind of been through this over the past 10 years where commitments to private equity have steadily increased, we haven’t seen that the impact or the notion of more capital could result in lower returns, we we saw the opposite.”

Asset managers are increasingly targeting retail clients for fundraising and with new products, in a bid to open up access to private markets for a group that has been largely excluded until now.

Individual investors have been drawn to private markets because of the potential for higher returns.

The survey found that more than 70% of investors said their private equity portfolios have outperformed their public equity holdings since the global financial crisis.

In fact, 94% of LPs reported net annual returns above 11%, with 42% reporting returns above 16% over the life of their private equity portfolios.

“What’s interesting to see as well is that LPs continue to increase their allocation to the asset class, whether it’s private equity or private debt and credit, so I think this is reassuring about the health of the industry,” added El-Khoury.

While a majority of LPs, around 54%, have increased their target allocation to private equity over the past two years, there is a bit more variety in changes to private credit allocations. Only 35% of LPs have increased their target private credit allocations.

This may be due to some concerns about default rates, particularly in North America, where a third of LPs believe rising interest rates will lead to higher default rates in their private credit portfolios. This is compared to a fifth of European LPs.

Meanwhile, investors are getting more adventurous with their allocations, targeting emerging areas such as the metaverse, where 17% of LPs plan to make commitments over the next year.