Aberdeen research indicates that private markets could potentially outperform traditional 60/40 portfolio strategies, as it sets out 8-point plan to make private markets “work for public good.”
As noted in the update from Aberdeen, private markets might significantly boost returns from retirement pots and even offer much-needed diversification.
According to research study, a diversified private markets basket of shares would have actually outperformed a 60/40 strategy by 100 percentage points over the last 18 years.
At present, savers face the prospect of “inadequate retirement incomes, with traditional 60/40 portfolios under pressure in a low-yield, high-volatility environment.”
So, it’s no surprise to see private markets “gaining traction, both at a policy and asset management level.”
Aberdeen, the specialist asset manager, says that giving individuals greater access to private markets could potentially “transform lives.”
Greater transparency and conversations about “risk and value for money will be crucial to success.”
As clarified in the report, Aberdeen is not suggesting that traditional portfolios blending investments in equities and bonds “should be replaced.”
But Aberdeen does believe there is “a real place for private markets in more portfolios.”
Yet without addressing barriers such as transparency, benchmarking, and access, the benefits of private markets will “remain out of reach for most individuals.”
Aberdeen’s 8-point plan calls for “higher standards of disclosure” across private markets as well as for a product neutral approach from Government, given that some vehicles will work “better for certain types of investor than others. ”
Although there is room for private markets in ISA portfolios, as per Chancellor Rachel Reeves’ recent Mansion House speech regarding LTAFs, pensions remain “the ultimate wrapper due to their ultra long-term nature.”
As stated in the latest research report, a diversified, equally weighted basket of private market assets would have delivered “a total return of 370% between Q2 2007 and the end of Q1 2025, whereas a 60/40 portfolio would have seen a 268% increase over the same time period.”
Looking over the past 18 years to include the global financial crisis, Aberdeen, using data from MSCI Burgiss, constructed “a portfolio equally weighted across private equity buyout, venture capital, real estate, infrastructure, natural resources and private credit.”
Xavier Meyer, CEO at Aberdeen Investments, said:
“Private markets have huge potential to transform the lives of investors, as well as channelling investment into public services. But there are significant barriers to overcome. The everyday investor must remain at the heart of our thinking on private markets. That mindset was key to creating the 8-point plan we set out today. If we are to help ensure people benefit from the long-term potential of private markets, then pensions have to be front and centre. But running alongside that we need to tackle head on the issue of risk versus reward and value for money – conversations that can only happen if we also significantly improve transparency.”
Nalaka De Silva, Head of Private Markets Solutions at Aberdeen Investments, said:
“Millions of people around the world are forecast to have an insufficient income in retirement due to low levels of pension savings. So it’s no surprise that attention has turned to the benefits private markets can offer. Their long-term nature of private market investments, even versus publicly listed shares or bonds, should mean investors can demand a higher level of return over the very long term.”