The driving forces behind the expansion of Private Assets
Looking back at the 1980s and 1990s, companies looking to finance their growth had little choice but to go public, raising capital through stock markets. IPOs were a crucial step for expanding businesses, providing them with the funding needed to scale operations, invest in innovation, and compete globally. Today, this dynamic has shifted dramatically. The rise of abundant private capital – through venture capital, growth equity, private equity and private debt – has enabled companies to stay private for much longer, bypassing the need for public markets to fuel their expansion. “With trillions of private capital now available, many companies choose to remain private longer, delaying their IPOs and often listing at higher valuations than they used to. The average time to IPO has increased from 4 years in 1999 to 12 years in 2020” explains Jérôme Zahnen, head of private equity offering at Banque de Luxembourg. “As a result, a big part of the value creation now occurs in the private markets before companies go public.”
Beyond these trends, today’s equity landscape is also highly concentrated, with the so-called Magnificent Seven tech giants accounting for a disproportionate share of the global market capitalization. Given this environment, investors should consider broadening their opportunity set, and private assets, like private equity, provide a compelling alternative. In fact, among companies generating annual revenues of USD 250 million or more, 86% remain privately owned, underscoring the vast investment potential outside public markets.
Private debt also presents an attractive opportunity, particularly as banks have become more selective in corporate lending following the 2008 financial crisis. Similarly, infrastructure investments, another key segment of alternatives, offer not only a hedge against inflation, but also diversification and access to long-term secular trends, – such as data centers for artificial intelligence and electricity production facilities & grid infrastructure for the energy transition, – both of which require substantial capital.
The opportunities are vast, the risk-return tradeoff remains attractive and consequently Private Assets are increasingly becoming a core allocation in diversified “all-weather” portfolios.
The evolving role of private banks in the private markets space
As highlighted above, the investment landscape has undergone a significant transformation in recent years, prompting private banks to deepen their expertise in private assets and adapt how they incorporate these assets into clients’ portfolios. “Traditionally, private banks have primarily provided access to third-party alternative investment funds. However, as private assets become a more central component of portfolio construction, banks are now focusing on a more sophisticated advisory approach to help clients navigate the complexities of these investments. The objective remains unchanged: to build a portfolio that aligns with the clients’ financial goals while optimizing risk-adjusted return” highlights Clément d’Espagnac, private equity investment advisor at Banque de Luxembourg.
Unlike traditional closed-end funds, which typically take years to deploy capital and achieve optimal exposure, evergreen funds offer an allocation from day one.
Historically, many investors gained access to private assets through personal networks, which often lead to a misunderstanding of the risks involved and potentially great return dispersion. This informal approach lacked structure and diversification needed for effective portfolio management. Today, most high net-worth individuals are changing their approach and are now seeking institutional-style portfolio construction, integrating private markets into their broader portfolios while considering correlation with traditional assets.
Product innovation in the private asset space is also expanding opportunities to private banks and its clients. A prime example is the rise of evergreen funds, which offer an innovative solution to accessing private markets; “Unlike traditional closed-end funds, which typically take years to deploy capital and achieve optimal exposure, evergreen funds offer an allocation from day one. This makes it much easier to incorporate private assets into customized, balanced portfolios, alongside public market investments.” says Jérôme Zahnen.
Finally, the emergence of fintech platforms is prompting private banks to differentiate themselves. While these platforms are participating in democratizing access to private markets, they have not fully addressed the complexity of investment decision. Many investors struggle with the fundamental question “Where, how, and how much should I invest?”. While digital platforms excel at efficiency, they often lack the personalized advisory services that many investors require. This is where private banks truly add value, leveraging their expertise, research and data to guide strategic capital deployment and optimize risk-adjusted returns.
By integrating private assets strategically within well-constructed portfolios, we ensure that investors not only gain exposure to this growing opportunity set but do so in a way that aligns with their long-term financial objectives.
While private assets have traditionally been seen as complex, they are becoming an essential component of modern investor portfolios. The evolving market landscape – characterized by companies staying private longer, concentrated public markets, and increased demand from investors seeking better diversification – has reinforced the need for a structured, institutional approach to private assets. “At Banque de Luxembourg, we are responding to these changes by offering more than just access to the asset class; we are leveraging expertise, technology and tailored advisory services to help clients navigate this space effectively. By integrating private assets strategically within well-constructed portfolios, we ensure that investors not only gain exposure to this growing opportunity set but do so in a way that aligns with their long-term financial objectives” concludes Clément d’Espagnac.