The economic slowdown should act as a warning sign for firms promoting private markets to their clients, with regulatory processes likely to be placed under greater scrutiny as investors explore divestment options, says fintech Delio.
The lower liquidity of private markets means it is much more difficult for investors to divest if they become unhappy with the investments they have made. This is more likely to happen if they find their income or assets squeezed in other areas, something that is already happening as other costs continue to rise and inflation hits levels not seen in 40 years.
The democratisation of private markets has allowed greater numbers of investors to get involved in what has been one of the top performing investment sectors for more than a decade. The obvious appeal of returns that have consistently out-performed public markets has meant that private markets have become an increasingly popular offering to investors that have been keen to diversify their portfolios.
However, if proper regulatory controls have not been implemented by the firm promoting the investment opportunities, there are likely to be serious questions to answer about whether potential investors have been presented with deals that are aligned to their regulatory classification and whether or not they could potentially have been mis-sold.
