Matt Shafer Explores Private Market Opportunities in 2024 and Beyond
Jun 4, 2024
PGIM Investments’ Matt Shafer discusses his optimistic outlook for private markets and the ongoing efforts to increase access for retail investors.
Matt Shafer vividly recalls the ascension of emerging markets investing near the turn of the century more than two decades ago. Today, the Head of International Distribution at PGIM Investments says it would be hard to argue a portfolio is truly diversified without allocations to emerging market equity and debt.
He sees parallels in the rapid rise of private market investing over the past 10 years. As regulations aimed at increasing access to these assets—which are not listed on public exchanges—continue to evolve, allocations in high-net-worth investor portfolios are estimated to jump from $4 trillion in 2023 to $13 trillion by the end of 2032.
‘We could be on the cusp of an unprecedented surge in demand,’ Shafer said.
Before private markets can be considered a conventional asset class for the masses, however, there are hurdles to overcome. For example, many investors in the broader wealth and retail channels are not accustomed to alternative asset exposure other than real estate, and they may be reluctant to invest in private credit, private equity or venture capital.
Liquidity also remains an issue, despite efforts by the financial industry to deliver investment vehicles—and regulatory agencies to approve them—that are efficient for retail investors. While the European Long-Term Investment Fund and Long-Term Asset Fund are two strategies that have significantly enhanced liquidity compared to traditional private market offerings, vehicle structure uniformity across the industry is lacking.
‘This will continue to evolve as an increasing number of asset managers unveil additional private asset products,’ Shafer said.
Like previous forays into largely untapped investment sectors, education and training will be crucial. While many investors note the appeal of private market portfolio exposure, particularly the low correlation to global equity and fixed income markets, it involves much more than simply adding on to traditional asset allocation strategies. Still, the private market investing outlook remains optimistic.
‘For true long-term investors able to deal with liquidity constraints, private market exposure is an extremely compelling way to dampen overall portfolio volatility, as well as diversify risk/return and income streams,’ Shafer said.
Read the full article in Investment Week for more private market insights from Matt Shafer.
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