A new era for private markets: How diversification and innovation are reshaping the future
A recent white paper, Trends in Alternative Investing, published by IFI Global in partnership with Jersey Finance, explores the macro forces shaping the future of private markets - from shifting investor dynamics to the rise of digital investment models and non-traditional fund structures.
Investor diversification: Beyond institutions
Following more than a decade of strong growth, many institutional investors, particularly pension funds, have reached their allocation ceilings for alternative investments. A slowing IPO market has added further constraints, prompting asset managers to seek new sources of capital beyond their traditional investor base.
High-net-worth individuals and family offices are coming into focus. Despite historically low allocation to alternatives - just five per cent of this investor segment had exposure in 2022 - research shows that more than half plan to increase their allocations in the next three years.
This presents a clear mutual benefit: asset managers gain access to underutilised capital, while investors gain exposure to private markets that were once difficult to access. However, challenges remain. Accessing alternatives can be opaque, costly and dependent on existing advisor relationships. High minimum investment thresholds and liquidity constraints further complicate participation.
Product and structure innovation: Expanding access
In response, managers are embracing structural innovation. Beyond traditional pooled funds, the rise of managed accounts, co-investments, funds-of-one and hybrid vehicles reflects a broader shift towards customisation. Fees have decreased, particularly for managed accounts, making them more accessible to a broader range of investors.
This trend is accelerating globally, with fund jurisdictions reporting notable growth in demand for flexible, non-traditional structures. New entrants to the market are often focused on structuring optionality - meeting investors where they are with bespoke vehicles tailored to their objectives.
Digitalisation and tokenisation: The new access frontier
Perhaps the most transformative development lies in digitalisation. Blockchain-based infrastructure and tokenisation are lowering barriers to entry in the private markets space. Tokenised assets can offer greater transparency, enhanced liquidity and significantly reduced minimum investment thresholds, particularly beneficial for high-net-worth and potentially even retail investors in the near future.
Forecasts suggest tokenised market capitalisation could reach $2 trillion by 2030 (McKinsey, 2024). High-net-worth investors are expected to allocate an average of 8.6% of their portfolios to tokenised assets by 2026, surpassing institutional counterparts (EY Parthenon, 2023).
Tokenisation also holds promise for high-value investments such as real estate, infrastructure and private equity. While regulatory uncertainty persists - identified by 24% of high-net-worth investors as a concern - it is clear that tokenised solutions are opening new avenues for access and growth.
A changing landscape, a broader horizon
At the mid-point of the decade, the private markets landscape is evolving rapidly. Investor demands are shifting, structural innovations are accelerating and technology is reshaping access in unprecedented ways. Asset managers are no longer serving a single class of institutional investors; they are building strategies that appeal to a far more diverse and globally distributed investor base.
In parallel, regulators and fund domiciles are rethinking how they support the needs of modern fund structures - balancing innovation with oversight, and access with protection. These dynamics are enabling new partnerships between managers and investors, fostering more inclusive growth in alternatives.
For asset managers, family offices and private investors alike, this new era presents not only challenges but a remarkable opportunity. The next chapter in private markets will be defined by those who embrace diversification, adapt to new technologies, and stay agile in a sector where the rules are still being written.
An Kelles is Director – GCC, Jersey Finance. Elliot Refson is Head of Funds, Jersey Finance.
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