A study by the research and consultancy firm, on behalf of the French bank, says HNW individuals are mostly comfortable with these private asset classes, although risks and valuations make some hesitate.

The majority (more than 70 per cent) of high net worth individuals in a recent Scorpio Partnership study say they are prepared to plough money back into private equity and private real state funds in the near future, suggesting continued hunger for these assets’ sources of yield.

The study, from among 337 people around the world who have at least $5 million of investible wealth, and conducted for BNP Paribas Wealth Management, also showed that risk levels was the main reason for why some HNW individuals aren’t yet involved in these private asset class spaces. Some 31 per cent of poll respondents said risk was a barrier, followed by 25 per cent who said these assets are expensive.

The French bank plans to launch a suite of private market funds over the next six months.

While private equity/private real estate may be unfamiliar areas for the general investing public, high net worth individuals are increasingly comfortable with these areas. Many HNW clients are themselves entrepreneurs and familiar with the investment, timing and management issues these asset classes involve, BNP Paribas told this publication in a briefing about the Scorpio results.

The study is also relatively unusual in that it polls the views of end-clients, rather than an advisors and institutional wealth managers, as is often the case, the bank said.

Recent figures from groups such as Preqin have shown big inflows into private capital markets in recent years, albeit with some falling off in the past 12 months as the sectors seek to absorb the “dry powder” of money not yet committed. There has also been rising caution about rising valuations (see story here). 

Valuations have been rising, but leverage involved in private equity deals today, for example, is far less than the levels seen prior to the 2008 crash, Claire Roborel de Climens, global head of private and alternative investments at the French bank’s wealth arm, told this publication yesterday. At BNP Paribas, the firm favours, for example, US large-cap firms as private equity targets in contrast to smaller-size firms, because of more attractive valuations, she said. Also, the bank in general prefers clients to hold a blend of different investment vintages to spread risk, she said. 
“Over the past 12 months, we have seen a significant pick-up in investor appetite for private equity and private real estate. In this still low interest rate environment, investors are looking for double-digit returns to optimise their portfolio’s risk-return profile,” de Climens said.

Among other findings, the poll showed that more than 60 per cent of respondents said they were familiar or very familiar with private equity/private real estate. On average, active investors in these assets hold 16.3 per cent of all their portfolios in these assets, with 15.8 per cent of it in cash and 15.3 per cent in stocks. More than 40 per cent of the respondents said they planned to move money into these assets “in the near future”.

The most compelling reason for entering these assets were the opportunities available (55 per cent of respondents said this was a reason); 35 per cent said they liked the areas because it balanced a wider portfolio; 32 per cent said they had been advised to invest by an advisor.

Fieldwork for the survey was conducted in nine countries across Europe, Asia and the Gulf region of the Middle East. Some 65 per cent of respondents were male; 21 per cent were Baby Boomers, 61 per were GenX/Y and the rest were Millennials (under 35).