Private capital is attracting cash from individuals like never before, with several firms looking to tap into this source of dry powder.
PE Hub Europe spoke to Rashmi Madan, head of EMEA for Private Wealth Solutions at Blackstone, about the growth of private investment in private markets and how investing individuals’ money in asset classes like private equity differs in approach to investing institutional cash.
Madan, who is based in London, was previously chief operating officer of institutional client solutions (ICS) in Europe as well as head of ICS Europe for Blackstone Credit.
What is the strategy behind Blackstone Private Wealth Solutions, and how has it grown, in headcount and AUM, over the last few years, overall and in Europe specifically?
Our Private Wealth Solutions business is focused on providing our partners – private banks and their clients – with access to institutional quality investing in private markets. That allows individuals to invest beyond traditional asset classes and unlock differentiated opportunities. This is an area where we have seen substantial growth. To give you an idea of this growth: the AUM Blackstone handles on behalf of retail investors globally now stands at $236 billion, a four-fold increase in the past four years. Our team dedicated to individual investors in Europe has doubled over the past year and now stands at nearly 300 worldwide. We have been very encouraged by this growth, and I believe we’re only at the start of the trajectory.
Why are private investors now interested in private markets? Is it a loosening of regulation or more of an organic process, with individual investors becoming ever more sophisticated?
I think there are a number of reasons for the rise in private market popularity amongst eligible individual investors. As you say, an increased level of education around private markets is definitely a factor. We do our part to encourage this by hosting Blackstone University events. These are sessions with our distribution partners where Blackstone investment professionals provide their insights into latest asset classes and broader private market trends. We have found these sessions to be very popular. Another, more current, reason for the growth in popularity has been the unique ability of private markets to provide potential protection for investors in the current market environment.
Why are private markets attractive in the current environment?
In the current environment, what worries most people are these three dynamics: high inflation, rising interest rates, and market volatility. Private markets can provide unique protections against each of these. With private real estate, having the option of rent adjustments, the asset class has the potential to provide protection against inflation. With private credit, floating rate credit may protect against rising interest rates. And market data proves that private market solutions are far less volatile than publicly traded counterparts. These are reasons why we see a lot of individuals turn their attention to private markets in the current environment.
What, if any, constraints do you face when investing individual investors’ cash in private markets?
None at all – there is a common misconception that I can help clear up. When it comes to the investment approach which we offer individual investors, it is the same institutional-quality standard which Blackstone offers across the board. This means we follow the same thematic approaches as the firm overall, identifying and targeting economic and societal megatrends where we see big tailwinds and leveraging our investment teams’ knowledge and expertise from across the Blackstone platform. We are proud that we are able to draw on Blackstone’s decades-long experience working for institutional investors to bring proprietary solutions to eligible individual investors – it is a major advantage.
What does the future hold for Blackstone Private Wealth Solutions?
The years ahead offer great opportunities for Blackstone’s Private Wealth Solutions business. I already alluded to this earlier, but the scale of opportunity really is immense – the private wealth market globally is worth an estimated $80 trillion, but private wealth investors on average hold around 5 percent exposure to private markets today, compared to about 30 percent to 50 percent in the case of pensions funds and endowments. Even if individual allocation rises by only a few percent, that unlocks a wave of possibilities. And we expect this to rise significantly. For us, that means building our team, building our offering, and focusing on providing educational support on a greater scale, to reach more and more partners. I look forward to working with my team to deliver these goals and continue our success in the future.