Stock Market Volatility Is Pushing Investors to Private Markets

Despite last week’s stock market rally where we witnessed the market jump 6%, it was an overall volatile month to say the least. And unsurprisingly to most, June is off to a wobbly start for the public markets.

Oh, and Bitcoin fell below $30,000 again today. 

So if public markets and illiquid alternatives are performing poorly, and inflation is so high that saving cash is just money down the toilet, where are people putting their money? 

The wealthy are turning to private equity

According to a recent WSJ article, private fund managers are reporting an increase in allocation from wealthy individuals this year, and expect the trend to continue as increasing interest rates and inflation concerns stay top of mind for investors.

In fact, high-net-worth (HNW) individuals may be racing faster to private equity than institutions, according to data from Boston Consulting Group and iCapital. By 2025, the HNW are expected to rack up a compound annual growth rate of 19% and hold more than 10% of capital raised by private equity firms. 

And although private markets are experiencing a boom, they have the return history to back it up. 

A new report from investment firm Hamilton Lane outlines the pooled average buyout returns of private equity funds as well as private credit’s performance in comparison to the public markets over the last 20 years.

Hamilton Lane report comparing private equity and private credit performance to the public markets over the last 20 years.
Source: Hamilton Lane

What about access to private markets?

The big question then is, when will access to private markets open up to a wider pool of investors?  

Currently, most private equity investments are exclusively available to accredited investors who meet a set list of qualifications outlined by the SEC. 

Access to private markets is expanding, though. Online platforms such as Moonfare allow private equity investments starting at a minimum capital requirement of $125,000. Still, for non high-net-worth investors, that’s a hefty minimum.

And as more and more investors demand access to private funds, as they’re already doing now, more pressure should arise to expand access.

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