What's the best investment case for private market assets?

A recent survey by Blackstone’s Private Wealth Solutions group indicates strong appetite for alts, with a significant majority of financial advisors using private market investments for their growth efforts.

According to the survey, which polled more than 525 advisors within Blackstone University’s network, 82 percent of advisors agree private market investments help attract new clients, as they can serve as valuable differentiators in the high-net-worth space.

“More than 40% of surveyed advisors recommend clients allocate 10-20% of their portfolios to private markets, similar to family offices that often invest 20% or more,” Blackstone noted.

Blackstone published the survey findings in the wake of its third quarter earnings report, which showed the company beating expectations on several fronts.  Its distributable earnings reached $1.3 billion, up 7 percent year-over-year, while fee-related earnings rose 5 percent to $1.2 billion. It hit a new $1.1 trillion record in assets on the back of a 10 percent annual rise in AUM.

Meanwhile, its private equity and private credit businesses posted impressive performance, with its private equity funds delivering a 6.2 percent quarterly return that fed into a 15.2 percent annual gain. Its private credit investments delivered a 3.6 percent quarterly and 16.7 percent annual return.

Critics have noted that US stocks have done extremely well so far in 2024, with the S&P 500 putting up a roughly 20 percent return for the year till September. But that might be beside the point for the 63 percent of advisors who cited diversification as the primary reason for adding private equity in the current environment, compared to 26 percent who highlighted higher potential returns and 11 percent who pointed to reduced volatility.

"Private equity can serve as a core building block for clients seeking diversification and enhanced returns," Blackstone said.

Touching on real estate, Blackstone's survey found robust bullish sentiment among advisors, with 67 percent saying they intend to increase or maintain their exposure to private real estate over the next 12 months. That could mark the beginnings of a turning point in a sector where the alts giant has been struggling along with other asset managers over the past few years.

"At the beginning of the year, Blackstone saw signs that real estate values were bottoming," the firm said. "We believe we are at an inflection point in the cycle."