Private Markets for HNW Clients: How Advisers Can Access Alternative Investments

The widening opportunity in private markets

Private markets are no longer the exclusive domain of pension funds and endowments. Over the past decade, the range of vehicles available to wealth advisers and their HNW clients has expanded significantly. Yet many advisory firms still allocate little or nothing to alternatives, leaving a meaningful source of return and diversification on the table.

For advisers serving clients with GBP 1 million or more in investable assets, understanding how to access private markets, and when it is appropriate to do so, is becoming a core competency rather than a niche specialism.

Why private markets matter for HNW portfolios

The case for including private markets in HNW portfolios rests on three pillars: return premium, diversification, and alignment with client time horizons.

Public equity markets have become increasingly concentrated. A handful of technology companies dominate global indices, and traditional fixed income no longer provides the cushioning effect it once did. As explored in the case for multi-asset portfolios, broadening beyond equities and bonds is not about complexity for its own sake. It is about building portfolios that genuinely reflect client objectives.

Private markets complement this by offering:

• Return premium. Private equity has historically outperformed public markets over most rolling periods, partly compensating investors for reduced liquidity.
• Lower correlation. Private credit and infrastructure returns tend to behave differently from public equities, improving portfolio risk-adjusted performance.
• Income diversity. Private credit and real assets can provide income streams that are less sensitive to interest rate movements than traditional bonds.
• Inflation protection. Infrastructure and real assets often have revenues linked to inflation, offering a natural hedge that is difficult to replicate in public markets.

The main private market asset classes

Private equity

Private equity involves investing in companies that are not listed on a public exchange. Strategies range from buyouts of established businesses to growth equity in expanding companies. Returns are driven by operational improvement, strategic repositioning, and leverage.

For HNW clients, private equity has historically been the largest and most established component of private markets. According to UK Private Capital ↗ (formerly the BVCA), portfolio companies backed by UK private equity firms employ 2.5 million people and received GBP 29.4 billion in investment during 2024 alone.

Venture capital

Venture capital targets early-stage and high-growth companies. The risk profile is higher than buyout private equity, but the return potential can be substantial. UK venture capital has produced notable successes across fintech, life sciences, and deep technology.

For most HNW clients, venture capital exposure is best accessed through diversified fund structures rather than direct investment, given the high failure rate of individual ventures and the need for portfolio construction across vintages.

Private credit

Private credit, sometimes called private debt, involves lending to companies outside the traditional banking system. Strategies include direct lending, mezzanine financing, distressed debt, and speciality finance.

This asset class has grown rapidly since the 2008 financial crisis as banks retreated from mid-market lending. For HNW clients, private credit offers:

• Regular income, often at floating rates
• Lower volatility than public equities
• Seniority in the capital structure, providing downside protection

Real assets

Real assets encompass property, farmland, timberland, and natural resources. They offer tangible value, inflation linkage, and income that is often uncorrelated with financial markets.

For UK HNW clients, commercial property and agricultural land have long been familiar asset classes. Newer opportunities include logistics, life sciences real estate, and renewable energy assets.

Infrastructure

Infrastructure investment covers essential services such as transport, energy, digital connectivity, and social infrastructure (hospitals, schools, public buildings). Revenue streams are typically long-term, contracted, and often inflation-linked.

The UK government’s ongoing commitment to infrastructure spending, particularly in energy transition and digital networks, has created a pipeline of opportunities accessible to private capital.

Comparative overview of private market asset classes

Asset class	Typical return target (net)	Liquidity	Lock-up period	Income profile	Key risk
Private equity (buyout)	12-18% IRR	Very low	7-12 years	Capital growth	Operational, leverage
Venture capital	15-25% IRR (wide dispersion)	Very low	8-12 years	Capital growth	Binary outcomes
Private credit	7-10%	Low to moderate	3-7 years	Regular income	Credit default
Real assets (property)	6-10%	Low to moderate	5-10 years	Income and growth	Valuation, illiquidity
Infrastructure	7-12%	Low	10-25 years	Stable income	Regulatory, political

Return targets are illustrative and based on historical ranges. Past performance is not a guide to future results. Actual returns vary significantly by manager, vintage, and strategy.

How advisers can access private markets

The access landscape has changed materially in recent years. Advisers no longer need to navigate institutional-only fund structures to include alternatives in client portfolios.

Listed investment trusts

London-listed investment trusts provide daily liquidity and transparency while investing in underlying private assets. Trusts focused on private equity, infrastructure, and renewable energy have been available for years and trade on the London Stock Exchange.

The trade-off is that share prices can diverge from net asset value, sometimes trading at significant discounts, which creates both risk and opportunity.

Long-Term Asset Funds (LTAFs)

The FCA’s LTAF regime, introduced to broaden access to long-term illiquid assets, has created a new vehicle type specifically designed for defined contribution pensions and certain wholesale investors. Several asset managers have launched or are developing LTAFs focused on private equity, infrastructure, and private credit.

For advisers, LTAFs offer a more accessible entry point than traditional limited partnership structures, though liquidity remains restricted by design.

Semi-liquid funds

A growing number of asset managers now offer semi-liquid vehicles that provide periodic redemption windows (typically quarterly or monthly) while investing in private markets. These structures suit HNW clients who want private market exposure without committing to a full 10-year lock-up.

Fund of funds

Fund of funds managers construct diversified portfolios across multiple private market funds, offering diversification by strategy, geography, and vintage year. This approach reduces manager-specific risk and is well suited to clients making their first allocation to alternatives.

Direct fund access

For clients with larger portfolios, typically GBP 500,000 or more per commitment, direct access to institutional-quality private market funds may be possible. This requires specialist knowledge and strong manager relationships.

Access route comparison

Due diligence for private market investments

The due diligence burden for private markets is greater than for listed investments. Advisers must evaluate areas that simply do not apply to public market funds.

Manager selection

Manager selection is the single most important driver of returns in private markets. The dispersion between top-quartile and bottom-quartile private equity managers is far wider than in public equities. Choosing the wrong manager can result in years of locked-up capital delivering poor or negative returns.

Key questions for adviser due diligence include:

• Track record. What has the manager delivered across multiple fund vintages? Is the track record attributable to the current team?
• Team stability. Have the key investment professionals remained in place? Key person risk is a real concern.
• Fund terms. What are the management fees, carried interest, hurdle rate, and distribution waterfall? Are terms aligned with investor interests?
• Valuation methodology. How are underlying assets valued? Are valuations audited independently?
• Exit history. Has the manager demonstrated an ability to realise investments successfully?

This builds on the principles covered in due diligence when choosing a discretionary fund manager, but with additional layers specific to illiquid assets.

Custody and operational infrastructure

When client assets include private market holdings, institutional-grade custody becomes even more critical. Private market investments involve complex legal structures, capital call mechanisms, and distribution processes that require specialist operational support.

Advisers should verify that the custodian or platform they use can handle the administrative complexity of alternative assets, including capital call management, distribution processing, and consolidated reporting that brings private and public holdings together in a single view.

Regulatory considerations

Private market investments sold to retail clients in the UK are subject to FCA rules on suitability and appropriateness. Advisers must ensure that clients meet the relevant criteria and that the recommendation is documented thoroughly. The FCA’s authorisation requirements ↗ also cover firms that arrange or manage alternative investments.

Consumer Duty adds a further layer, requiring advisers to demonstrate that private market investments deliver fair value relative to their costs and that clients understand the liquidity constraints involved.

Suitability considerations

Not every HNW client is suited to private market exposure. Advisers should consider several factors before recommending an allocation.

Liquidity requirements

Clients who may need to access the majority of their capital within three to five years are generally poor candidates for private market allocations. The illiquidity premium only works for investors who can genuinely commit for the long term.

Portfolio context

Private market allocations should complement, not replicate, existing public market exposure. A client whose portfolio is already concentrated in property or a private business may not benefit from further illiquid holdings in the same asset class.

Understanding and expectations

What HNW clients actually want from their adviser includes clarity and transparency. Private markets involve valuation lags, J-curve effects (where returns are initially negative as fees and costs are drawn before investments mature), and unpredictable cash flows. Clients need to understand and accept these characteristics before investing.

Tax implications

The tax treatment of private market investments varies by structure and asset class. Certain vehicles, such as VCTs and EIS funds, offer significant tax advantages but come with specific holding period and eligibility requirements. Advisers should consider how private market allocations interact with broader tax year planning for each client.

Building a practical allocation

For advisers looking to introduce private markets into HNW portfolios, a phased approach is sensible:

1. Start with established structures. Listed private equity and infrastructure trusts offer a way to introduce alternative exposure without committing to long lock-ups.
2. Add semi-liquid or LTAF exposure. As clients become comfortable and the adviser’s knowledge deepens, semi-liquid vehicles provide a step towards less liquid strategies.
3. Consider a diversified allocation. A mature alternatives allocation might blend 5-10% in private equity, 5% in private credit, and 5-10% in infrastructure or real assets, depending on the client’s profile.
4. Review and rebalance. Private market allocations require ongoing oversight, including vintage year diversification, monitoring of capital calls and distributions, and periodic reassessment of overall portfolio liquidity.

Suggested allocation ranges by client profile

Client profile	Investable assets	Private market allocation	Preferred access route
Core HNW	GBP 1-3 million	5-10%	Listed trusts, semi-liquid funds
Upper HNW	GBP 3-10 million	10-20%	Semi-liquid funds, LTAFs, fund of funds
Ultra HNW	GBP 10 million+	15-30%	Direct fund access, co-investment

Illustrative ranges only. Actual allocations must reflect individual client circumstances, objectives, and risk capacity.

The role of the multi-family office

For advisers managing larger client portfolios or seeking to offer institutional-quality alternatives access without building the infrastructure themselves, partnering with a multi-family office (MFO) can be transformative.

An MFO such as Alpha Investment Office provides the operational backbone, manager relationships, and institutional custody (through SEI, which administers over $1.4 trillion globally) needed to deliver a credible private markets proposition. This allows advisers to focus on the client relationship and financial planning while the MFO handles investment management, due diligence, and reporting across both public and private markets.

This approach addresses one of the key reasons HNW clients leave traditional wealth managers: the feeling that their portfolio lacks genuine sophistication and personalisation.

Looking ahead

The democratisation of private markets is accelerating. New fund structures, regulatory changes such as the LTAF regime, and growing client demand mean that advisers who ignore alternatives risk falling behind. According to Preqin ↗, global private capital assets under management have more than doubled over the past decade, and the trend towards broader access shows no sign of slowing.

The Investment Association ↗ has also noted the growing importance of alternatives in multi-asset portfolios, and several of its members now offer vehicles specifically designed for the UK adviser market.

For wealth advisers serving HNW clients, private markets are no longer optional. They are an essential part of a modern, well-diversified investment proposition. The question is no longer whether to include them, but how to do so responsibly and effectively.