Wealthy individuals in Switzerland see private market investments as an important part of their investment strategy. While around 30% are already invested, 40% of those not yet invested would be interested if private market investments were more easily accessible. Currently, private equity is the most sought-after asset class, representing in 84% of portfolios. Infrastructure and private debt are hardly represented, while real estate features in the portfolios of 33% of the survey respondents already invested in private markets. These are some of the findings of a new report published by Mercer and Titanbay which surveyed over 100 wealthy individuals in Switzerland with liquid assets of between 500.000 and 5m CHF each.
While there is lots of interest in private markets, there are a number of (perceived) barriers preventing wealthy individuals from making such investments. A lack of knowledge (47%) and higher expected risk when compared to other types of investment (43%) are the two main reasons cited for not investing currently. Higher cost (17%), a difficulty in finding suitable offers (17%), long lock-up periods (12%) and minimum investment amounts being too high (11%) are other barriers mentioned.
“Our survey shows that wealth managers and private banks have their work cut out for them” comments Wolfgang Batt, Principal at Mercer Switzerland. “The interest in private markets investments is there, but so are barriers and challenges. Some of them are merely a lack of education, which can and should be addressed proactively by the providers. Others, such as cost and minimum investment amounts, can be a bit more tricky to solve. But there are already offers in the market, e.g. some that rely on fintech platforms, that could address these, too.”
Interest in private equity remains high, with 87% of those with a strong interest in private market investments picking it as their desired asset class. 50% of them would want to invest in a diversified fund of funds, while 27% would prefer private markets to form part of their current wealth management mandate. When asked how they want to access these investments, 47% prefer a hybrid offering consisting of a digital platform coupled with personal advice. 27% prefer a purely personal consultation, whereas 20% want to go purely digital. When looking at the reasons for private market investments, 70% of respondents are looking for more diversification, 53% for more return, and 7% want to achieve more impact, e.g. in the dimensions of social and environmental, with their investment.
Most survey respondents (70%) are looking to invest up to 100.000 CHF in private markets. 6% plan to allocate between 300.000 and over 500.000 CHF. More than half (53%) of wealthy individuals in Switzerland expect the majority of their capital to be paid back in the next 5 to 7 years, while one third would be happy to lock in their investments for 8 to 10 years.
“Flexibility and listening to clients’ needs will be key in providing private market solutions that work for wealthy individuals. They want access to institutional-level solutions with broad diversification across excellent managers and strong returns, but without the potential downsides of big ticket sizes and complex subscription processes” comments Tobias Wolf, Head Investments at Mercer Switzerland. “New, digitally driven solutions and platforms will be key in providing individuals access to private markets, as the more traditional approaches don’t really work for them.”
According to a recent global survey amongst 125 wealth managers (WMs) in 26 countries, 73% of WMs are either invested or considering investing in illiquid assets in the next 12 months. An overwhelming majority (86%) say the main reason for investing in private markets and other illiquid asset classes is for better yields or enhanced investment returns - partly expecting attractive entry options in the next years. However, 71% of wealth managers are concerned with lock-up periods, while 59% say they did not have the necessary resources to perform the required due diligence before investing. Just 21% of those surveyed said their clients thought fees were too high for these types of investment funds and strategies. “Improving the client experience” was the number 1 business priority (76%) for the WMs surveyed.
“The results of our global wealth manager survey confirm that the trend towards illiquid assets as a driver of diversification and returns has emerged both at the level of wealth managers and their clients. Interestingly enough, some of the challenges seem to be the same across the board” comments Wolf. “The lock-up periods, lack of resources and other current barriers show the need for solutions that simplify the access to private markets, both for individual clients and wealth managers. However, clients also rely on WMs for guidance and education, and WMs obviously recognize the importance of the client experience, so it would make sense for them to proactively work towards breaking through the status quo and provide their clients with suitable investment opportunities.”
Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 83,000 colleagues and annual revenue of over $20 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit mercer.com. Follow Mercer on LinkedIn and Twitter.