Advisers consider a number of key factors when considering whether to invest a proportion of a client’s money in private assets, according to the latest FTAdviser poll for Talking Point.
When asked, what is the main factor that dictates how you allocate part of a client’s portfolio to private assets, the answers were fairly evenly split between attitude to risk (29.6 per cent), liquidity requirement (29.6 per cent) and client’s total assets (27.3 per cent).
The remaining 13.6 per cent of financial advisers selected ‘other’ as their answer.
Private assets are investments that are not publicly listed and traded.
Examples of private assets include private equity, real estate, infrastructure, securitised credit, and microfinance.
Philip Dragoumis, director and owner at Thera Wealth Management, says at his firm, client allocation to private assets is mostly tax driven - VCT/EIS - and only for high net worth and reasonably sophisticated clients.
"Even then, we are in favour of heavy due diligence and significant diversification between providers and funds." Dragoumis added. "We wouldn't tend to recommend these investments go beyond 10 per cent of investable net worth.
"For the majority of clients, especially now with the higher pension allowances, there should be no allocation to private assets. Private assets lack liquidity but more importantly transparency as we have found with many EIS and VCTs over the past year.
"As providers on the whole "mark their own homework" the valuations often are out of step with financial markets and reality. The tactic of hiding the real value of asset and hoping the storm will blow over will backfire at some point."
