Private markets are central to alpha generation

Fund flows into unregistered alternative funds are projected to grow by 90%.

While registered alternative funds are set to grow by 30%, driven mainly by private wealth diversification into private markets.

A combination of the 60/40 portfolio structure no longer delivering expected returns, and the move from defined benefit to defined contribution pensions, reducing automatic exposure to private markets, is fueling demand for new access routes into private markets.

As a result, evergreen structures are proliferating in number.

Indeed, the expansion of private market access for individual investors is not dissimilar to the disruptive impact that ETFs had on traditional portfolios in the 2000s. Consequently, private markets are increasingly expected to become a mainstream "third tool", alongside public active and passive investments.

In response to this, the asset management industry is witnessing a surge in joint ventures, strategic acquisitions and partnerships as asset managers seek to accelerate their entry or expansion in private markets.

Global institutions such as Franklin Templeton have grown their private markets book of business to approximately $260 billion through strategic acquisitions and organic growth.

This "build vs. buy" dynamic reflects a recognition that organically building origination and underwriting capacity, in areas such as private credit, is both time and capital intensive. Indeed, origination capability is regarded as a key competitive advantage, enabling asset managers to leverage extensive networks to access differentiated deal flow and superior risk-adjusted returns.