Access, alignment and edge: the evolving challenge of investing in private markets

Private markets have grown rapidly over the past two decades. Institutional investors have steadily increased their allocations to private equity, infrastructure and private credit as they search for diversification and higher long-term returns.

Yet for many wealth investors and family offices, accessing the full opportunity set remains challenging. The structure of private markets means the best opportunities are often difficult to reach, and outcomes can vary dramatically depending on manager selection.

Natasha Nankivell, founder of Global Alternative Funds, a provider of access to leading alternative asset managers and investments globally, argues that these dynamics are often underestimated by investors entering the asset class.

“Manager selection in private markets is absolutely critical because the dispersion of returns between the best and worst managers is enormous,” she says.

For advisers and investors exploring private markets, understanding that dispersion is one of the most important starting points.

The reality of manager dispersion

Unlike many public markets, private-market performance varies significantly between managers operating within the same strategy. Top-performing funds can deliver materially higher returns than their peers, while weaker managers may struggle to outperform public markets.

Industry data consistently highlights this dispersion. In private equity, the difference between top-quartile and bottom-quartile managers can stretch into double-digit return gaps across investment cycles.

This dynamic makes manager selection particularly important. Simply allocating capital to a private market strategy does not guarantee superior outcomes.

Nankivell believes this reality is sometimes overlooked as private markets become more widely marketed to wealth investors.

“Just because something sits in the same asset class does not mean the risk or return profile is the same,” she says.

In practice, the difference between selecting a top-tier manager and an average one can determine whether private markets deliver genuine alpha.

The access problem

Even when investors understand the importance of manager selection, accessing the best opportunities is often difficult.

Many leading private market funds operate with limited capacity and long-standing institutional investor relationships. As a result, new investors may struggle to secure allocations, particularly if they lack scale.

This dynamic can create a two-tier market. Large institutions with established networks often gain access to highly sought-after funds, while smaller investors are left with a narrower set of opportunities.

Nankivell says this structural imbalance was one of the key challenges she observed when examining the private markets landscape.

“The best managers in the world are typically oversubscribed and often difficult for individual investors or smaller pools of capital to access,” she explains.

As private markets continue to grow, solving this access challenge is becoming an increasingly important topic within wealth management.

Diligence remains the hard work

Another reality of private markets is the level of due diligence required before committing capital. Unlike listed equities, where financial information is widely available, private investments require extensive analysis of both the underlying assets and the managers overseeing them.

Pitch decks and marketing materials rarely reveal the full picture.

Nankivell argues that investors must devote significant time to evaluating managers, strategies and investment processes.

“There is simply no shortcut to proper due diligence when investing in private markets,” she argues.

This process often involves analysing track records across multiple funds, reviewing portfolio company outcomes and understanding how managers generate value. It also requires evaluating softer factors such as team stability, governance structures and the credibility of the investment process.

For advisers allocating client capital, this level of analysis can represent a significant operational challenge.

Alignment matters as much as access

Beyond manager selection and diligence, alignment between investors and managers is another critical component of successful private market investing.

Private equity and other alternative strategies often involve complex fee structures. These can include management fees, performance fees and additional costs embedded within underlying investments.

While performance incentives can align interests when structured correctly, they can also create misalignment if investors bear risks without corresponding upside participation.

Nankivell believes investors should examine how managers share both the rewards and risks of their strategies.

“Alignment of interest is critical because investors want to know that managers have meaningful capital invested alongside them,” she says.

When managers commit their own capital, the incentives to protect and grow investor funds tend to be stronger.

Finding managers with genuine edge

Another factor separating leading private market managers from the broader field is their ability to source opportunities others cannot easily access.

Many managers claim to possess unique sourcing channels or deep operational expertise. However, Nankivell argues that genuine competitive advantages are rarer than marketing materials might suggest.

Successful managers typically demonstrate clear differentiation in how they originate deals, structure investments or improve the businesses they acquire.

In some cases, this edge comes from deep technical knowledge within a sector. In others, it may arise from long-standing industry relationships or specialised operational capabilities.

“You need to identify managers that have a real moat around what they do, not simply a good story,” Nankivell notes.

Without that competitive edge, it becomes difficult for a manager to consistently outperform over time.

Private markets in the wealth channel

As private markets expand, ‘wealth’ investors are becoming a larger source of capital for the asset class. Family offices, high-net-worth investors and advised portfolios are increasingly seeking exposure to alternatives.

However, these investors often require different structures from large institutions. Many lack the resources to evaluate individual private market funds in detail or to construct diversified portfolios across multiple strategies.

As a result, investment structures that aggregate capital and provide curated access to private market opportunities are becoming more common. For Nankivell, the objective is straightforward: private markets should be accessible without compromising the quality of the underlying investments.

“The goal is to ensure investors are accessing the best opportunities available, not simply the ones that are easiest to distribute,” she says.

A more complex investment landscape

The private markets ecosystem is evolving rapidly as new capital enters the asset class. Greater participation from wealth investors is expanding the opportunity set but also increasing the importance of careful selection and diligence.

For advisers, the challenge is navigating an investment universe that offers both significant potential and considerable complexity.

Private markets can provide compelling diversification and return opportunities. However, the outcomes depend heavily on choosing the right managers, structures and investment partners.

As Nankivell sees it, the future of private market investing will increasingly revolve around three core principles: access, alignment and edge. Investors who can secure all three are far more likely to capture the long-term value the asset class promises.