What does the ‘democratisation of private assets’ really mean?

Accessing private market investment opportunities can be an attractive option for individual investors looking for new sources of returns and diversification. But what are they all about?

Private assets are investments not listed on the stock market or readily tradeable. Examples of private assets include private equity, real estate, infrastructure, securitised credit, and microfinance.

Private equity refers to the investment partnerships used to buy and sell unlisted companies for a profit and to generate returns for investors.

Real estate focuses on the investment in physical properties, such as offices, retail industrial and logistics as well as sectors such as hotels.

Infrastructure covers a number of sectors, including airports, telecommunication networks, traditional and renewable energy, smart grids, energy storage and fibre networks.

Securitised credit refers to the bundling of cash flows from various loans, such as mortgages or credit car payments, into bonds known as asset-backed securities.

Microfinance is a type of impact investing that provides loans and other financial products and services to low-income borrowers.

As private assets are generally not listed, and owned by a small number of parties, they are usually much less liquid than publicly-traded assets. While this can make them less volatile, it also brings some other challenges that demand specialist skills.

Deep knowledge of the sectors and experience in managing private assets are essential.

Because of its illiquid nature and complex structures, these investments were previously only accessible to big institutions. However, some types of private assets are now becoming much easier to access for other, smaller investors.

The evolution in the way investors can access private markets is often described as ‘democratisation of private assets’. This means there are now simpler ways to invest with developments to offer flexible liquidity and more diversification. Innovation in the way products are built, technology and regulations have helped to make this happen.

In this video we explain what private assets are, what ‘democratisation of private assets’ means, and what opportunities are available for investors.