Private markets move from institutional niche to adviser reality
Private markets, once the preserve of banks and institutional investors, are opening to retail portfolios as asset managers broaden access beyond traditional listed markets. FAnews attended a recent Cogence presentation to learn more about how financial advisers should position their clients for this asset allocation trend shift.
Responding to the de-listing trend
Liam Davis, who is the Lead CIO for Wealth Solutions EMEA at BlackRock, was on hand to describe the next phase of the BlackRock-Cogence partnership as the pair begin thinking about allocating to private markets within the Cogence portfolio. “Global stock markets and the number of listed companies are shrinking, and we are seeing more companies stay private for longer,” Davis said. “This means the [listed] investment universe is narrower than it has been in the past.”
At the same time, stock market returns are being driven by a narrower subset of the total company universe. Case in point, the bulk of the returns generated by the United States S&P 500 index during 2023 and 2024 came from just seven shares, nicknamed the Magnificent Seven. “There has been very, very strong performance leadership from a very, very narrow set of names,” Davis said. In practice, this has made it incredibly hard for active managers to outperform passive benchmarks.
The presenter noted that the balance between listed and private companies started moving as early as 2004. At that time, the average period that a company would stay private before listing was around eight years; by 2014, the average time had risen to 10 years; and by 2024 the average time had increased even further. “In the context of narrow stock leadership, volatility and geopolitical risk there is an increasing need to diversify our portfolios into alternative asset classes,” Davis explained, before describing the private markets journey in greater detail.
Private market opportunities on the rise
The key message for financial advisers and clients is that opportunities in private markets are forecast to grow each year until 2030, and likely beyond that. Davis noted that multi-asset investors could benefit from exposure to multiple segments of the private market universe, spanning private equity, private credit, infrastructure and real estate. To ensure investors’ funds are allocated in the sweet spot of this universe, the asset manager favours risk factors over sentiment to structure holistic, risk-controlled and risk-managed portfolios.
This aligns well with Cogence’s objective of “true global reach for diversification that matters”, as shared by the firm’s CEO, Jonel Matthee-Ferreira. “Strategic asset allocation accounts for about 80% (or more) of the drivers of return,” she said, before singling out active versus passive, geographies, investment styles and private versus public markets as essential sources of diversification within a portfolio.
Explaining a portfolio manager’s role is simple, but executing on it is anything but. In essence, these investment professionals must select and blend asset classes within portfolios, optimising exposure to maximise risk-adjusted return while identifying the strongest opportunities across each asset class. In traditional markets, this means determining the optimal mix of bonds, cash, commodities, equities and listed property.
Add private markets to the equation and the task becomes more complex. Portfolio managers must navigate private equity, being companies that have not yet listed; private credit, or loans sourced from alternative lenders; infrastructure, including bridges, solar facilities, toll roads and wind farms; and real estate. In addition, asset managers increasingly view private markets as a viable channel for accessing structural themes such as artificial intelligence (AI). “AI is becoming a key theme on the private market side,” Davis said.
Forget going all-in on private markets
Investment linked to AI infrastructure, battery production, hyperscale data centres and semiconductor capacity is increasingly flowing through private market structures, often supported by private equity and private credit capital. The successful strategy does not require going all-in on private markets. Instead, according to Davis, portfolio managers will still rely on traditional markets to bolster portfolio returns. “We are still going to rely on equity beta, duration; gold and the other traditional public risk factors that are important for our portfolios,” he said.
Equity beta refers to the broad market return investors earn simply by being exposed to listed equities. It is the underlying growth engine of most long-term portfolios, driven by corporate earnings and economic expansion rather than manager skill. Duration, meanwhile, captures a portfolio’s sensitivity to interest rate movements, typically through fixed income holdings. Longer-duration assets tend to benefit when rates fall and suffer when rates rise, making duration a key tool in managing portfolios through economic cycles and monetary policy shifts.
It helps to think of private market exposure as an additional diversifier or risk factor, or as portfolio managers phrase it, additional alpha. Alpha refers to returns generated above the market benchmark, typically through manager skill, access or structural advantages rather than broad market exposure. In the context of private markets, alpha is often linked to sourcing proprietary deals, improving operational efficiency within portfolio companies or capturing illiquidity premia that are not readily available in public markets.
Improving risk-adjusted returns
In a multi-asset context, the presenter explained that private assets are intended to “help improve the risk-adjusted return for the same sort of portfolio”, effectively strengthening outcomes by blending private exposure into a public-only mix. The presenter shared an ‘efficient frontier’ graphic to illustrate the point. “The addition of private markets, provided it has been constructed in an efficient way, [helps] to move that efficient frontier up,” Davis said. The key argument is that private markets exhibit low correlation to public equities, meaning they are typically less sensitive to short-term market shocks.
Davis emphasised that private markets should not be viewed as a single return driver, but as a combination of distinct asset classes with different roles to play. Private equity may seek an uplift over global equities; private credit can serve as an alternative to traditional high yield exposure; infrastructure offers access to long-term capital-intensive projects; and real estate provides differentiated property exposure beyond listed REITs. “We are not expecting all of these asset classes to outperform public equities,” he noted. “They all have a different role to play within the portfolio.”
The allocation decision hinges on construction discipline. BlackRock’s capital market assumptions and Aladdin risk modelling inform how these exposures are blended, with illiquidity risk explicitly considered before sizing allocations. That process ultimately led the team to view a 15% allocation to private markets as appropriate within a diversified markets portfolio, embedded in a long-term globally diversified strategy rather than a short-term tactical tilt.
Navigating inflation and interest rates
Looking back at the second half of 2025, Matthee-Ferreira noted a decisive shift in global monetary policy as the US Federal Reserve cut rates three times towards year-end. Emerging market fixed income benefited from easing inflation and a weaker dollar, with South African income portfolios delivering close to 12% over the period. Gold also rallied strongly on the back of geopolitical uncertainty and central bank buying, while global equities advanced, led largely by the ongoing AI theme.
For advisers positioning portfolios into 2026, she cautioned that markets remain fluid despite last year’s positive backdrop. South Africa’s move towards a 3% inflation target has improved perceptions among global peers, but the path for rates and currencies remains uncertain. “It is important to make sure that you have exposure to these asset classes,” she concluded, underscoring the case for diversified positioning across both public and private markets as the cycle evolves.
Writer’s thoughts:
As the skew between public and private markets widens, it seems inevitable that more asset managers will add private exposure to diversified multi-asset portfolios. Do you believe private market exposure adds measurable value for your clients? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
