Private equity funds have captured a record 50.5% of private capital fundraising year-to-date as the sector continues to lead private markets amid growing interest from private wealth investors, according to a new report from Barclays Private Bank.
The inaugural report, Forging New Paths: How private investors are capitalising on the evolution of private markets, sheds light on the resilience and growth potential of private equity (PE), and venture capital (VC), identifying the key trends that private investors could consider when building a diversified portfolio.
The report highlights that global closed-end private capital funds had assets under management of $14.7tn as of 2022, a figure projected to reach $19.6tn by 2028. These funds have collectively raised nearly $2tn in additional fresh capital since the beginning of 2023.
According to the report, both PE and VC have seen strong historical returns, but the significance of manager selection cannot be understated. PE vintages from 2011 to 2022 outperformed the S&P 500, while VC funds, which have displayed greater volatility, have exhibited stronger returns with an 11.8 per cent 15-year internal rate of return (IRR).
Limited partners (LPs) meanwhile, have a preference for experienced private equity managers. In each year since 2019, more than 80% of all new PE dollars raised were closed by experienced managers, with this figure rising 88% YTD.
The report also shows that family offices are increasing and diversifying their private market allocations, reflecting a desire to capture higher returns and align investments with personal values or global trends. High net worth individuals (HNWIs) are looking beyond the traditional 60/40 portfolio to private markets in bid to increase resilience and diversification in their portfolios.
Venture capital is also playing an increasingly prominent role in private wealth portfolios, with nearly half of all private capital fund commitments in the past decade being allocated to VC by count. However, the number of VC funds actively raising capital has declined, presenting both challenges and opportunities for investors seeking to maintain their exposure to the asset class.
