Private Markets are no longer considered a niche or peripheral strategy and have become an essential component of long-term wealth management portfolios. The rationale is clear – thanks to the illiquidity premium, private markets offer access to return opportunities that are hard to replicate in public markets.
They also bring meaningful diversification, with distinct risk and return characteristics that help balance traditional portfolios. In a world where volatility and macroeconomic uncertainty continue to challenge traditional asset classes, the case for private markets has only strengthened.
Over the past decade, global private capital assets under management have more than doubled, driven not only by institutional allocations but also by growing interest from private wealth investors. Asset managers have responded by developing wealth-friendly products, including evergreen vehicles and semi-liquid structures, which reduce traditional barriers to entry.
Discretionary landscape
Discretionary portfolio management is a cornerstone of the UK wealth industry, reflecting the strong trust clients place in professional managers to make investment decisions on their behalf and ensure portfolios stay aligned with their risk profile and long-term goals. In this fiduciary set-up, that responsibility comes with a need for careful judgement.
There is little debate around the value of including long-term private assets in these portfolios to capture the illiquidity premium. With the ‘why’ well understood then, it is now a question of how to make it work in practice.
Despite this discretion and the well-understood value of private markets, actual adoption within discretionary portfolios remains limited. Aside from listed investment trusts, which often serve as a proxy for private markets, true exposure to private equity, private credit, real assets and venture capital remains the exception rather than the rule. The level of expertise at wealth firms is a vital next piece of the private markets puzzle.
Many firms within the UK do have some level of expertise, particularly when it comes to their centralised investment functions. There have been hires from private banks into CIO roles, in addition to firms bolstering their private markets or alternatives teams. More broadly, while there is still room for improvement, the wealth management industry accepts the strategic case for private markets and is increasing its knowledge of them.
What remains unresolved, then, is the operational challenge of integration. The question facing firms is not ‘Why private markets?’ but rather ‘How can we implement them at scale, across diverse client portfolios, within the regulatory and operational framework of a discretionary business?’
“The question now facing firms is not, Why private markets? – but rather, How can we implement them at scale, across diverse client portfolios, within the regulatory and operational framework of a discretionary business?
Barriers to penetration
The core barriers to integrating private markets into discretionary portfolios are complex and multi-faceted – with a primary one being regulatory and compliance risk. Although discretionary managers are not constrained by retail eligibility rules in the same way as advised clients, they must still meet rigorous suitability requirements. Each investment must align with the client’s objectives, time horizon and risk appetite. Without the right technology to segment clients, assess appropriateness and apply these assessments consistently, wealth managers often default to caution.
Beyond compliance, there is a significant operational challenge. Private markets are administratively complex. Closed-ended funds involve capital calls, irregular distributions, long lock-up periods and dense subscription documents. Even semi-liquid funds, which aim to address some of these frictions, introduce their own set of complexities such as hard and soft lock-ups, liquidity gates, redemption penalties and limited dealing windows.
These features are difficult to manage within portfolios and often fall outside the capability of legacy systems. Another key issue is the limitations of current technology platforms. Most are built for daily-dealing public funds and lack the flexibility to accommodate illiquid investments. Even existing platforms which support private markets struggle to track individual client positions accurately, particularly where different share classes, lock-ups or liquidity terms apply – predominantly being built as dealing desk solutions. Integration with reporting systems and performance analytics is also limited, further complicating adoption.
Internal expertise plays a role too. While many firms have invested in alternatives teams or recruited talent with private markets backgrounds, confidence in selecting and managing private market investments across a broad client base is still developing. In some cases, centralised investment functions are prepared, but the infrastructure and governance processes to scale these allocations are not yet in place.
Recent innovation in fund structures has played a critical role in bringing private markets closer to the discretionary opportunity. Evergreen ‘semi-liquid’ funds are designed to combine the return characteristics of traditional private markets with a level of liquidity that better aligns with wealth management clients.
They typically offer monthly subscriptions and quarterly redemptions, hold a buffer of liquid assets to meet these potential redemptions and do not require capital calls. Analysis by Mercer has highlighted the significant advantages these funds offer – for example, allowing for faster capital deployment compared with closed-ended vehicles and supporting better asset allocation management.
Nevertheless, these benefits come with trade-offs. The liquidity buffer may constrain overall fund returns, and redemption limitations still apply in times of market stress. Advisers must understand the risks associated with liquidity mismatches and use pacing models and risk overlays to manage expectations appropriately.
Changing technology infrastructure
For discretionary portfolio managers to fully unlock the value of private markets, significant changes to technology infrastructure are needed. The first is scalable compliance and suitability assessments. Firms need tools that can segment clients effectively, monitor suitability dynamically, and apply guardrails at the individual level to prevent misallocation. Without this, compliance and risk teams will remain a barrier to adoption.
Second, operational complexity must be removed. This includes streamlining subscriptions, automating capital call and distribution-tracking, enabling accurate position management and integrating these processes into existing workflows. Only when private market funds behave operationally like mutual funds can they be adopted into model portfolios at scale.
Third, firms need robust access to institutional-quality investment opportunities. Curated manager selection, due diligence support and diversification across vintages, strategies and geographies must be available in a format that aligns with discretionary mandates. Wealth managers need confidence in the products they are recommending and the tools to defend those decisions.
Finally, internal buy-in is essential. Firms must elevate private markets within their investment governance frameworks, provide training and education and embed alternatives into the asset allocation conversation. Without leadership and commitment, implementation will remain piecemeal.
James Singleton is head of UK distribution at Titanbay, which partners with UK wealth managers to solve the practical challenges of bringing private markets into both advisory and discretionary client portfolios. You can read the full version of the firm’s white paper, Scaling Private Markets in Discretionary Portfolios, here
