ZURICH, LONDON, NEW YORK, HONG KONG — High net worth individuals (HNWIs) are expected to increase their capital commitments to private equity at a rate which will outpace institutional growth in the asset class, with a CAGR of 19% by 2025. This is one of the key findings from The Future is Private – Unlocking the Art of Private Equity in Wealth Management, a new report co-authored by Boston Consulting Group (BCG) and iCapital1, published today investigating the potential that private equity holds for wealth managers and their clients.
The report also examines the scale of the rapidly growing market opportunity for wealth managers and how they can position themselves to respond and serve their clients’ growing demands in this space.
By 2025, HNWIs will account for more than 10% of all capital raised by private equity funds and the total AUM of individual investors in private equity will be 2.4 times larger than today, rising to US$1.2 trillion.
“Our study underlines not only the magnitude of rising HNWI asset allocations towards alternatives, but also the size of the market opportunity for banks and wealth managers who expand access to private market investments for their high-net-worth clients. It is not only an opportunity for wealth managers, but downright a responsibility towards their clients to do so,” said Anna Zakrzewski, Managing Director and Partner, Boston Consulting Group. “By helping clients more adeptly tap into alternatives as part of a holistic approach to portfolio planning, banks and wealth managers can alleviate the margin pressures they are experiencing today.”
“We are seeing a greater proportion of wealth creation taking place outside public markets driven by the fact that companies stay private longer.” said Marco Bizzozero, Head of International at iCapital. “As a result, and because of the enhanced return and diversification benefits, Wealth Managers are making private markets a key strategic priority. Technology and education will play a critical role in supporting Wealth Managers in responding to the growing demand to incorporate private markets in a diversified portfolio.”
While the trend of rising HNWI allocations is reflected across all markets, the report finds capital commitments to private market investing opportunities by affluent individual investors is set to grow at a faster pace in Asia Pacific. According to the report, individual investors from APAC will represent 37% of total HNWI allocations by 2025.
The report puts forward a systematic approach for how banks and wealth managers can access and make the most of this substantial opportunity, using state-of-the-art technology solutions – often provided by fintechs – to efficiently scale their private markets business and overcome the barriers which have historically held back HNWI investors in gaining exposure to alternative assets: a cumbersome, historically paper-based investment process; a manual client servicing model with several administrative complexities; and a lack of insightful analysis and education for advisors and individual investors.
A copy of the report can be downloaded here.
About Boston Consulting Group
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact.
Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fuelled by the goal of helping our clients thrive and enabling them to make the world a better place.
About iCapital
Founded in 2013 in NYC, iCapital is the leading global fintech company powering the world’s alternative investment marketplace. It has transformed the way the wealth management, banking, and asset management industries facilitate access to private markets investments for their high-net-worth clients by providing intuitive, end-to-end technology and service solutions. Wealth management firms use iCapital’s solutions to provide clients with quality funds at lower minimums and simplified digital workflows. Asset managers, RIAs and banks leverage iCapital’s technology to streamline and scale their alternative investments operational infrastructure. Additionally, the iCapital ‘flagship’ platform offers wealth advisors and their high-net-worth clients access to a curated menu of private equity, private credit, hedge funds, structured notes, and other alternative investments to help meet their investing needs for return and diversification. iCapital’s research and diligence team offers robust analysis alongside the firm’s extensive suite of advisor education, compliance, portfolio management, and portfolio analytics tools and services. iCapital was recognized on the Forbes FinTech 50 list in 2018, 2019, 2020 and 2021, the Forbes America’s Best Startup Employers in 2021, and MMI/Barron’s Industry Awards as Solutions Provider of the Year in 2020 and 2021. As of January 31, 2022, iCapital services US$112 billion in global client assets, of which more than US$25 billion are from international investors (non-US Domestic), across more than 940 funds. Employing more than 750 people globally, iCapital is headquartered in NYC and has offices in Zurich, London, Lisbon, Hong Kong, Singapore, and Toronto.
For additional information, please visit the iCapital website at icapital.com | LinkedIn: https://www.linkedin.com/company/icapital-network-inc | Twitter: @icapitalnetwork
See disclosures here.
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(1) Institutional Capital Network, Inc., and its affiliates including iCapital Securities LLC (together, “iCapital Network” or “iCapital”)
