A pertinent theme remaining in 2025 will be the convergence of public and private markets.
In some cases, particularly in the credit space, the characteristics of public and private investments have blurred (i.e. private assets can be more liquid than their listed peers) and both investors and asset managers are attracted to the higher potential returns of investing in less liquid, less transparent investments, but investors should remain wary for several reasons.
Kenneth Lamont, Strategist at Morningstar has stated that:
"Asset managers are paving the way for broader access to private investments by innovating with vehicles like ELTIFs or even wrappers famed for their liquidity like ETFs.
Industry giants like BlackRock and Legal & General IM have been positioning themselves for this convergence, while the UK government has announced the ‘world’s first’ private stock market’.
Investors should remain wary.
The outsized returns we have seen in some private assets may well be a mirage which evaporates before less sophisticated investors even arrive.
As private assets become more accessible, the market for them is likely to become more efficient, with fewer mispriced assets and less profit opportunities.
High fees, the erosion of the liquidity premium and higher correlations with other assets will also dampen the appeal.
Exactly how providers offer liquid exposure to illiquid assets will remain the key point of focus as options grow.”
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