As we step into 2025, private markets remain a critical component of diversified portfolios for high-net-worth and ultra-high-net-worth clients.
As described in my former article “Delivering Institutional Expertise into Wealth Portfolios”, the BlackRock Alternative Portfolio Solutions team demonstrated that adding private markets to public portfolios may enhance their risk-return profiles.
The resilience of private markets amid economic headwinds, combined with innovative structures like tender offer funds and business development companies (BDCs), offers unique opportunities for U.S. wealth advisors to differentiate their offerings and guide clients toward long-term value creation.
Here is a commentary on private market asset classes for US wealth advisors, along with highlights of the BlackRock 2025 Private Markets Outlook for Institutional investors.
We see the tide turning for private equity in 2025, driven by a more supportive rate environment and a resurgence of M&A and IPO activity. A more active exit market, coupled with an increased focus from GPs on returning capital, is offering relief to investors seeking distributions. Last year saw a turning point with distributions overtaking capital calls for the first time in eight years1.
Stabilizing value: In private equity, global quarterly exit values are settling in near their pre-pandemic average2
As a result, private equity continues to attract investors seeking higher returns and diversification. However, the traditional illiquidity of these investments has historically deterred some clients. To manage the slower exit environment of recent years, both LPs and GPs have turned to alternative liquidity structures to meet their liquidity objectives.
New structures will continue to rapidly evolve, as new investors enter the market, notably in wealth. U.S. Wealth investors are largely accessing private assets through evergreen semi-liquid fund structures, while European investors are adopting European Long-Term Investment Funds (ELTIFs).
Private equity tender offer funds provide clients with access institutional-quality investments and periodic liquidity, typically on a quarterly basis. For U.S. wealth advisors, these funds provide a solution for clients who desire exposure to private equity without committing to traditional fund structures’ extended lock-up periods.
Private debt continues to grow, solidifying its status as a sizable and scalable asset class for long-term investors. Totaling more than US$1.6 trillion3 in global AUM, it represents roughly 10% of the US$16.4 trillion alternative investment universe.
Private debt is taking on more fundings previously executed in the public markets, which increasingly focus on deals that are prohibitively large for most middle-market companies. Companies are also relying on private lenders more for financing as they stay private for longer.
Private debt global assets under management (unrealized value and dry powder), and AUM forecasts4
With rising interest rates, BDCs, which provide financing to middle-market businesses, offer attractive income opportunities. For income-seeking clients, they can complement traditional fixed income allocations. Advisors should prioritize BDCs with strong underwriting practices, diversified portfolios, and a track record of navigating credit cycles to minimize risk.
Real assets continue to attract flows, particularly thanks to their inflation-hedging qualities.
In infrastructure, the race to develop Artificial Intelligence technologies continues to accelerate, and substantial investment in supporting data centers and power, is crucial. Capturing this opportunity set requires experienced infrastructure investment teams across digital infrastructure and energy.
In real estate, after a challenging two-year downturn, we believe the asset class is now poised to benefit from economic tailwinds. Being a levered asset class, performance is heavily influenced by interest rate movements and debt availability. The start of the easing cycle has marked an inflection point, though pricing will not respond immediately to last year’s rate cuts.
For U.S. wealth advisors, private markets in 2025 present a unique set of opportunities. Through thoughtful allocation and proactive risk management, private markets can continue to drive long-term value for client portfolios.
By aligning investments with client outcomes and focusing on high-quality managers, advisors can help clients unlock the potential of this asset class through evergreen semi-liquid structures, such as the BlackRock Private Investments Fund (BPIF) and BlackRock Private Credit Fund (BDEBT). These vehicles offer enhanced access and liquidity options, while delivering competitive returns and diversification.
While private markets offer attractive opportunities, advisors must also guide clients through their risks. Some of them are pure investment risks, such as valuation pressures. Others are attached to the nature of semi-liquid instruments, such as liquidity risk, that must be carefully managed. Educating clients about these dynamics is critical to setting realistic expectations.