Rising interest from GPs in buying allocators allows them to capture the upside from structural trends. As long as they avoid conflicts of interest.
By Jack Arrowsmith, London
The entry of retail and wealth investors into private markets has offered GPs a compelling new capital pool to draw from. But the opportunity set extends beyond just fund allocations.
It is also at the portfolio company level where the opportunity is showing promise, with private capital increasingly targeting allocators.
Wealth managers and advisers are particularly popular. It’s easy to see why: as private market products become more accessible for retail investors, many are drawn in by the promise of higher returns. This can give wealth managers more capital from their existing clients, and new clients entering the market.
“This directly feeds into the addressable market for wealth managers that control the relationship to investors,” explains Tilman Ost, global private equity advisory leader at KPMG International, who says democratisation will be “a significant driver of AUM growth”.
In March, Carlyle acquired a majority stake in registered investment adviser (RIA) MAI Capital Management, while Bain Capital bought Perpetual Wealth, a division of the Australian wealth manager, in the same month. According to the Financial Times, the two firms are now competing to acquire Wealth Enhancement, another RIA.
The fragmentation of this space makes it of particular interest to private capital. Prior to Carlyle’s majority stake, MAI completed 30 acquisitions under a private equity ownership that included Harvest Partners.
For an industry underpinned by the trust clients place in their advisers, inorganic growth is an effective way to scale platforms. With their history of buy-and-build, private equity firms have ample experience in this approach.
“Acquiring local firms provides access to new regions and client communities, which might be challenging to build organically in a people business,” says Ost.
The importance of trust also provides the sector with some resilience to AI disruption.
“In such sensitive areas, clients will continue to value human judgement, accountability and an established relationship,” says Ost.
But that doesn’t make it fully immune. The sector has also faced concerns similar to those rippling across the software industry over the impact of AI.
“A prime example occurred earlier this year when US-based fintech Altruist Corp launched an AI-powered tax planning engine inside its Hazel platform,” explains Benny Wong, a partner at accounting firm PKF Littlejohn.
“The tool sparked immediate market anxiety, causing share prices for major UK wealth managers to decline over fears of compressed profit margins,” he adds.
As with the software sector more broadly, wealth managers are now looking to implement AI alongside their existing offerings to improve the client experience.
“We see technology and AI as an opportunity to strengthen the proposition rather than as a source of disruption to defend against,” says Emil Anderson, partner and co-head of financial services at investor Nordic Capital.
In March 2025, the firm was part of a consortium alongside CVC and ADIA that took British investment platform and wealth management business Hargreaves Lansdown private.
Anderson says other structural trends, such as demographic change, also make the sector attractive. The UK’s ageing population means there is a growing pool of pension capital that is ready to be deployed.
More of that seems to be going into private markets. The 2025 Mansion House Accords marked a voluntary commitment from 17 UK workplace pension providers to invest at least 10% of their defined contribution default funds in private markets by 2030. This provides another tailwind for investors looking to capitalise on private wealth participation.
“Long term savings can be well-suited to investments with longer time horizons, though considerations such as suitability, diversification and liquidity remain important,” Anderson says. The platform has begun to offer products to target private markets, partnering with Schroders Capital to offer two of its Long-Term Asset Funds.
The insurance side
Wealth managers aren’t the only allocators that are being targeted by private capital. There is also interest in insurers, with the $11bn merger between Apollo and Athene being the most high-profile example.
The deal offered the alternative asset manager a permanent source of capital to invest in its funds. When the merger was announced, Apollo Co-Founder Marc Rowan said it would give the firm “a bigger balance sheet to invest alongside clients in our various fund products”.
Apollo says that it originated 73% of Athene’s assets, while 17% are classed as being affiliated with the firm, a measure in the insurance industry that is used by regulators to help monitor related-party exposures.
This has raised concerns over whether closer ties with alternative asset managers come at the expense of policyholders.
For wealth managers, such a tie-up is unlikely. “Any attempt to favour the sponsor’s own funds would create clear conflicts of interest, with rules in place across jurisdictions,” says Ost.
In the UK, the Financial Conduct Authority requires that wealth managers providing independent advice to their clients must offer a range of products which is sufficiently diverse by type and issuer.
The options cannot be limited to the manager itself, or other entities affiliated with it. While a private equity owner’s products could in theory be part of that offering, conflict of interest risks abound.
This makes the opportunity more complicated for private capital. As GPs invest in allocators they can gain exposure to some compelling structural growth trends. But the closer this relationship becomes, the greater the scrutiny there will be over capital allocation. In industries built on trust, this could limit how far private capital can go.
