MIAMI, July 30, 2024 /PRNewswire/ — Crystal Capital Partners, a wealth-tech provider and leading turn-key alternative investment platform for financial advisors, today announced the results of its survey on private equity sub-strategies. The survey examined factors driving allocations and demand for buyouts, growth equity, secondaries, and venture capital. The results showed that growth equity, where private equity managers provide capital to established companies through minority stakes to help them finance growth initiatives, is the most popular sub-strategy with financial advisors.
The survey, completed by 45 prominent independent financial advisors on Crystal’s platform, revealed the following:
- Sub-strategy allocation trends:
- While most advisors noted that only a small percentage of clients were allocated to private equity strategies, growth equity is a standout. 23% of advisors said that more than 50% of their clients were allocated to the strategy. Growth equity also has the highest portion of current demand, with 38% of advisors noting that their clients were very interested in it and 7% stating that clients were extremely interested.
- By contrast, respondents were least interested in buyouts. Most advisors (70%) said that less than 10% of their clients were allocated to the strategy, and 38% of advisors said their clients were not interested in it.
- Secondaries and venture capital produced mixed results. Only 10% of advisors have more than half of their clients allocated to secondaries, and 7% have more than half allocated to venture capital. Just over a fifth of advisors (21%) said their clients were very interested in secondaries, while 16% said their clients were very interested in venture capital.
- Sector demand: 83% of advisors stated that clients were most interested in technology investments, followed by healthcare (66%), energy (29%), financial services (15%), and consumer goods (10%).
- Incentive for future allocations: Factors driving demand are split. Reasons given were the potential for high risk-adjusted returns (64%), diversification benefits (62%), the longer-term investment horizon (48%), and access to innovative companies (40%).
- Selection criteria: The most important criterion for clients was the fund manager’s track record (64%), followed by the investment strategy and focus (56%), the reputation and credibility of the fund/manager (49%), fees and expenses (42%), and alignment of interests (e.g., co-investment by managers), which was 29%.
- Barriers: There is a clear education gap in understanding the differences between private equity sub-strategies. Over a quarter of advisors (27%) said their clients do not understand the differences, while 42% stated that lack of understanding or knowledge was a primary barrier to demand. Beyond this, other barriers cited were illiquidity concerns (75%), perceived higher risk (50%), and high investment minimums (22%).
Steven Brod, Senior Partner, Chief Executive Officer, and Chief Investment Officer of Crystal Capital Partners, said: “There’s increasing demand from financial advisors for private markets. Private equity is traditionally associated with buyout investing. So, it is interesting to note that financial advisors are reporting that their clients prefer growth equity strategies with their higher risk-return profile. However, our survey also revealed that a large education gap exists when understanding the different sub-strategies within the private equity market. This underscores not only the importance of providing advisors with educational materials they can use with their clients but also the requirement for advisors to work with trusted third parties who can help them source top funds and create institutional-quality private equity portfolios that complement clients’ traditional assets.”
The 2024 Private Equity Investment Outlook Survey was open from May 28, 2024, to July 2, 2024.
About Crystal Capital Partners
Crystal Capital Partners is a turn-key alternative investment platform that provides financial advisors with exposure to third-party institutional private markets and hedge funds for their QP clients’ portfolios. Crystal’s clients include independent advisors, foundations, regional banks, IBDs, and single/multi-family offices. The company’s tenured experience in the alternative investment industry, coupled with decades of technology innovation, provides financial advisors with the front/back-office infrastructure needed to source, build, manage, and maintain bespoke alternative investment portfolios. Crystal is a Registered Investment Advisor headquartered in Miami, Florida.
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SOURCE Crystal Capital Partners
