High net worth individuals (HNWI) are more optimistic about private market investments than public markets.
According to a new survey from Connection Capital, HNWIs have a neutral view of the current investment environment, due to ongoing economic uncertainty and the new government’s tax plans.
Investors are particularly concerned about potential capital gains tax increases, which they fear may lead to reduced funding availability for small- and medium-sized enterprises (SMEs) in the UK.
“The economic travails of the past two years plus uncertainty about the new government’s policies on support for those investing in UK companies is undoubtedly responsible for an overall feeling of neutrality on the current market environment,” said Claire Madden, founder and managing partner at Connection Capital.
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“Despite this our clients understand that private market investments can generate alpha in any circumstances, especially where companies can be accessed at attractive prices.”
According to the survey, 36 per cent of HNWIs in the UK said that they were particularly optimistic about private equity as an asset class. Meanwhile, 29 per cent said they were bullish on public market equities, 25 per cent chose public market gilts/bonds and 17 per cent were most optimistic about private debt.
80 per cent of the HNWIs surveyed said that they plan to allocate to private equity and other alternative asset classes over the next 12 months.
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“Private capital investors supported almost 1,500 UK businesses right across the UK in 2023,” said Madden.
“90 per cent of these are classified as SMEs – widely recognised as the engine room of the economy. And total private capital investment reached almost £20.1bn.
“Private investors are a valuable source of this capital and the current rate of capital gains tax provides an incentive to invest in companies that are not without investment risk.”
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