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Building private markets into individual investors’ core portfolios

Rashmi Madan has over 10 years’ experience at Blackstone Handout photo 

Rashmi Madan has over 10 years’ experience at Blackstone Handout photo 

What’s the role of private market investments’ in driving the core of individual investor portfolios, and how is access to private markets being democratised? Blackstone’s head of EMEA for private wealth solutions weighs in. 

It is well known that private markets such as private equity, private credit and real estate have long been used by institutional investors to help reduce volatility and deliver consistent, long-term performance. What is less well known is the role of private market investments’ in driving the core of individual investor portfolios.

The increase in the wealth of the global high-net-worth individual population--Capgemini’s World Wealth Report 2022 recorded an increase of 7.8% in 2021--together with the impact of a slowdown in economic activity, inflation and geopolitical instability is shifting this dynamic. The traditional diversified portfolio of 60/40 stocks to bonds are arguably no longer providing investors with enough diversification to mitigate volatility and deliver investment returns across the economic cycle.

At Blackstone, we’ve long believed that private market investments can serve as foundational building blocks for both institutional and private wealth portfolios. However, for decades, these individual investors have had limited access to private market opportunities.

This is changing with efforts by private market asset managers like Blackstone to democratise access to private markets. It is enabling more eligible individuals to invest in private market assets and take advantage of these potential benefits.

Looking at individual asset classes, private real estate has proven an effective hedge against inflation. Unlike traditional fixed income which generate fixed cash flows, real estate leases are typically indexed to inflation or subject to regular rent reviews allowing income from real estate to rise over time.

Another good example is private credit. It benefits from floating rates which can keep up with a rising interest rate environment, as well as offering seniority in the capital structure and the ability to negotiate terms directly with borrowers. These attributes help ensure better structural protection and make for more defensive investments in comparison to traditional fixed income.

Finally, private equity continues to be seen as the most attractive asset class for private capital investment, with a history of performing well across the cycle.

With our track record in these asset classes, Blackstone is serving a wide range of clients, leveraging deep and trusted partnerships within the wealth management community in each of our local markets. This is particularly true in European cities, where we are investing in our on-the-ground presence and expanding our perpetual fund offering. In Luxembourg alone, we have a Blackstone team of nearly 40 staff, who sit at the heart of our European operations and bring deep local expertise, including to wealth management.

As we look to navigate a turbulent economic cycle, eligible individual investors can benefit from increasing their allocation to private markets as part of their core portfolio building blocks. To do this requires an understanding of these asset classes and an appreciation of their risks and benefits. With more private wealth clients in this space, the need for education will be paramount.

Rashmi Madan is the head of EMEA for private wealth solutions at Blackstone. Prior to her current role, Madan was chief operating officer of Institutional Client Solutions (ICS) in Europe, as well as head of ICS Europe for Blackstone Credit.