Semi-liquid vehicles set to surpass $3 trillion as more retail investors enter the market

Wealth managers and private market fund managers anticipate semi-liquid assets under management to rocket over the next four years, as more retail investors tap into the market.

Assets under management (AUM) held in semi-liquid vehicles is expected to exceed $3 trillion (£2.2 trillion) in 2030, according to Carne Group, with the market nearly tripling between 2020 to 2024 to roughly $349bn.

Nearly eight out ten private market fund managers expect the sector to surpass the mark by 2030, with wealth managers also bullish with 54 per cent predicting it to be between $3 trillion and $3.5 trillion.

Meanwhile, 18 per cent believe the figure will climb even higher.

Semi-liquid funds operate as open-ended investment vehicles, granting investors access to typically illiquid assets such as private equity, which had previously only been available for institutional investors.

But in recent years more sophisticated and mass-affluent investors have tapped into the market in a bid for further diversification and potential higher yields on returns.

Using vehicles

Over 70 per cent of wealth managers already use semi-liquid funds for their clients, with 28 per cent preparing to do so in the next two years.

The rapid speed of providers adopting the vehicles is reflected in the weighting of client portfolios, with wealth managers expecting five per cent of client’s investible assets to be held in semi-liquid funds within three to four years.

Others expect to hit the five per cent allocation within four to five years.

Des Fullam, chief regulatory and client solutions officer at Carne Group, said: “For this ‘retailisation’ trend to be sustainable, investors must fully grasp the mechanics of periodic redemptions and the long-term nature of the underlying assets. 

“Empowering wealth managers with the right educational tools is as critical as the digital infrastructure itself in ensuring that mass-affluent investors can build truly diversified, resilient portfolios.”

Supply shift

While wealth manager demand is clear, the fund supply chain is also moving at speed, with 19 per cent of private fund managers considering launching a fund within twelve months, a sharp jump from the two per cent who currently have one on the market.

Within the next 12 to 18 months, 42 per cent plan to launch a fund, with a further 29 per cent aiming for the next 18 to 24 months.

Fullam said: “We are seeing a historic pivot in how private capital is raised and deployed. Wealth managers are no longer viewing private markets as an optional ‘extra’ but as a core component of a modern, diversified portfolio.

“For fund managers, this represents a golden opportunity to tap into a massive, relatively untapped pool of retail capital.”

But he noted the “operational complexity” of managing such vehicles that only a few firms are “only now beginning to implement”.

Growth is also projected to move away from solely pension funds and institutional investors, as the line between themselves and retail investors blur and more look to secure a semi-liquid wrapper.