“Adopting private markets has not only helped our practice move upmarket by providing more sophisticated solutions, but it has also helped us retain clients during periods of volatility.”
– Independent registered investment advisor (RIA)
With all the buzz about opportunities in private markets, you may be wondering if they make sense for you and your clients. Here’s our practical three-step approach to help get started.
01
Prepare your practice
Private market investments can help you differentiate your practice and acquire desired high-net-worth clients by offering unique opportunities, which can also help you retain and consolidate assets.
02
Evaluate and adjust your portfolios
Expand your opportunity set to investments outside of public markets and open up your client portfolios to help them achieve their goals.
03
Talk to clients about the opportunities
Private markets may seem complex, but client conversations don’t have to be. Our specialists can help you confidently explain your portfolio decisions.
What advisors are saying
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“I think anyone who doesn’t offer private capital in our space is going to get left in the dust… it provides a certain cachet to your practice. Your practice will look unsophisticated if you’re not offering private markets and can’t speak intelligently about them."
– Bank advisor with $6 billion in AUM and a core market of clients with more than $5 million in assets.
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“Incorporating private markets into our practice allows us to better service the portfolio needs of high-net-worth clients especially during times of market stress. This is when we can add value as a financial advisor and differentiate our practice.”
– An independent registered investment advisor (RIA)
Frequently asked questions
Private markets may be relevant for clients who’re seeking additional income potential, broader, more diversified sources of return,1 access to private companies or real assets, or a solution for a specific planning need such as a real estate sale. Any opportunity should be evaluated based on a client’s objectives, constraints, risk tolerance, and ability to remain invested through market cycles.
Start with the client’s goals, time horizon, liquidity needs, risk tolerance, fee sensitivity, and overall financial picture. Private markets may make sense for a client who can commit capital for a longer period, understands the tradeoff of reduced liquidity, and is seeking exposure that may complement a diversified portfolio.1 These types of clients may also be looking for differentiated growth, income, diversification,1 or access to opportunities beyond public markets.
Rather than treating private markets as a separate conversation, you can evaluate how they may complement a client’s current allocation. That can include identifying the intended role they may play, sizing the allocation, selecting an appropriate vehicle structure, and considering how the investment may fit with existing public stocks, bonds, real estate, and other portfolio holdings.
Some private market investments are designed for longer-holding periods and may limit how quickly clients can access their money. The key is to evaluate that tradeoff based on the client’s broader plan, including ensuring short-term cash needs are addressed elsewhere before allocating to less liquid investments.
Invesco specialists can help you from interest to implementation, including supporting client segmentation, portfolio considerations, allocation discussions, and client education. We can help you build confidence, explain the private markets opportunity in plain language, and develop a practical framework for considering whether and how private markets may fit within a client’s broader investment plan.
Practical ways to prepare your practice
Private markets can help differentiate your practice — 81% of advisors agreed.1 We can help.
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01 Understand
Ensure that you have foundational knowledge of key private market asset classes and the role each can play.
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02 Segment
Identify clients based on investment goals, liquidity needs, time horizon, net worth, risk appetite, and fee sensitivity.
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03 Implement
Determine the investment size, role of private markets in the portfolio, vehicle structure, and potential solutions.
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04 Educate
Communicate the opportunity, risks, and potential value for the client’s overall investment plan.
Learn how to use private markets to attract high-net-worth clients in our “Differentiate your practice with alternatives” program.
Still have objections? How our specialists can support you
If you’re hesitant, just getting started, or looking to refine existing allocations, our specialists can help you identify opportunities, address challenges, and move forward with confidence.
Situation
You’ve avoided private markets because you associate them with complexity, illiquidity, and difficult client conversations.
Challenge
You’re not sure how to determine whether private markets can play a role in solving today's client needs.
How our specialists can help
We can provide foundational education on the private markets landscape, including key structures, sources of return, and portfolio applications. It can help you understand how different private market strategies work, where they may fit in a client portfolio, and how to communicate the opportunity and tradeoffs with confidence.
Situation
You’ve been investing in private markets for years and believe you have a well-diversified allocation.
Challenge
Most of your exposure may be concentrated in private equity and credit. You have limited visibility into where you may have gaps and whether you’re achieving true diversification1 across private markets.
How our specialists can help
We can map existing holdings across the four types of private markets — private equity and credit and real asset equity and debt — for concentration and uncover opportunities for greater diversification.1 Rather than focusing on products, we help you understand what role each allocation plays within the portfolio and identify opportunities to strengthen outcomes.
Practical ways to talk about private markets
Clients may have questions. Here are some typical ones and how to confidently answer them.
Situation
You’re working with clients interested in private markets, but they’re concerned about giving up access to their money.
Challenge
Clients may not fully understand the trade-offs between liquidity, return potential, and long-term portfolio objectives. You need to help determine which assets should remain accessible and which may be appropriate for a longer-term allocation.
How we can help
While private markets share some similarities with public markets, there are important differences to understand.
Situation
Your clients need income but are unsure whether traditional cash, bonds, or public market income strategies can provide it.
Challenge
Clients want meaningful income, but higher-yielding private market investments can come with added complexity, credit risk, liquidity constraints, and less transparency than public markets. You need help evaluating whether the income opportunity is appropriate for their objectives and risk profile.
How we can help
Help clients understand why they might want to consider private credit assets for their income needs.
Practical ways to evaluate and adjust your portfolios
Help solve typical challenges with potential private market solutions
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Large real estate sale
Clients selling a highly appreciated property and need a solution to help defer capital gains taxes.
Solution: 1031 exchange
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Higher income potential
Clients who are seeking more income than they earn from typical income-generating investments.
Solution: Private credit
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Diversified growth¹
Clients seeking to diversify their portfolios and add growth opportunities beyond public markets.
Solution: Private real estate
Help build more diversified¹ portfolios
When thinking about adding private market investments to portfolios, consider these sample allocations. The actual allocations will vary based on a client's objectives, risk tolerance, comfort with illiquid investments, and how they fit into their overall portfolio.
Investment |
Allocation |
Funding source |
|---|---|---|
Private equity |
40%–50% |
100% equities |
Private credit |
20%–30% |
30% equities 70% fixed income |
Real assets |
20%–30% |
50% equities 50% fixed income |
Hedge funds |
5%–15% |
100% fixed income |
Select from top opportunities
Invesco's partnerships with industry leaders Barings and LGT Capital Partners give you access to a broader range of private market investment opportunities. They can help enhance diversification,1 unlock new sources of return, and build more resilient portfolios to meet evolving client needs.
Important Information
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About risk
Alternative investment products and strategies — including hedge funds, private equity, private debt, and/or private real estate — carry a high degree of risk and may not be suitable for all investors. These investments often employ leveraging and other speculative practices that can increase the risk of loss, may be highly illiquid, and typically lack a secondary market. They are not required to provide periodic pricing or valuation information, may involve complex tax structures and delays in tax reporting, and are generally not subject to the same regulatory requirements as registered funds. Fees and expenses are often significant and may offset any trading profits, and underlying investments are frequently non-transparent and known only to the investment manager.
Alternative investment strategies may involve additional risks such as concentrated ownership, counterparty default, and exposure to changes in interest rates, rental yields, and general economic conditions, which can lead to fluctuations in value. These investments may result in greater volatility within a portfolio and carry a substantial risk of capital loss. Restrictions on transferability may apply, and investors should be prepared for long holding periods and limited liquidity.
