Atish Davda is EquityZen‘s CEO, former quant at AQR Capital and a Penn alum who loves FinTech, Python, traveling and tennis.
The secret is out about private markets. BlackRock’s recent announcement that its model portfolios will now incorporate private market investments marks a pivotal shift in the investment landscape. This move may make a significant impact in democratizing access to private assets—something to which I’ve dedicated my career. Big market moves like this also challenge the status quo. If BlackRock’s model portfolios make private market investments the norm, financial advisors may need to rethink their strategies to remain competitive.
The global economy is currently facing substantial headwinds. President Trump’s tariff announcements have injected uncertainty into the markets, with fears of a potential recession looming. These protectionist measures have led to increased market volatility, prompting investors to seek alternative avenues for diversification and stability.
The market landscape makes BlackRock’s strategic shift toward private markets all the more timely. By blending private and publicly traded assets, BlackRock aims to provide investors with more diversified and resilient investment portfolios. This move reflects a broader industry trend toward incorporating alternative assets to dampen the effects of volatility, while capturing the illiquidity premium and providing the potential for better risk-adjusted returns.
Implications For Financial Advisors
All market evolutions—from the launch of ETFs to SPACs—present both opportunities and challenges for financial advisors. Now that individual investors can more easily gain diversified exposure to alternatives while paying much lower fees than an advisor may charge, advisors will be challenged to further prove their value add. Here are some of the ways they can with regard to private market investments.
Differentiating Through Expertise
With private market investments becoming more accessible to individual investors, advisors can distinguish themselves by developing deep expertise in this market. Understanding the nuances of private assets, including their risk profiles and liquidity constraints, will be crucial. More financial advisors are differentiating themselves from their peers by building knowledge on the private markets. Whether providing liquidity to clients who are early employees or investors in startups or knowing the ins and outs of secondary transactions, they prove their value by their expertise in a growing, but niche market.
Curating Diverse Product Offerings
Advisors can also consider expanding their product suite to include differentiated options that are best-suited to their clients’ individual needs. This could involve partnerships with platforms that offer access to private investments or advisors developing in-house capabilities to evaluate and recommend private assets.
RIAs tell me that their clients seek access to the technology companies at the forefront of innovation in industries such as artificial intelligence and cybersecurity. There are different avenues to provide this access—each with different time horizons, investment minimums and investment structures. Much like they have with direct indexing in public portfolios, advisors can identify and curate private market products for their specific clients.
Enhancing Client Education
As private market investments become integrated into portfolios, educating clients about these assets becomes imperative. While the private market is growing rapidly, it can still be opaque and daunting to the uninformed. Talking with clients about private investments’ potential benefits and risks will build trust. Not every private market investment is right for every client. Advisors can help clients understand their options and choose the most appropriate investments for their situation and goals.
A Clarion Call For Investors
The financial market is undergoing a massive change as alternatives—once a wealth creation avenue only available for the ultra-wealthy—go mainstream. With the number of public companies continuing to diminish, it is more important than ever to offer this access to clients of all sizes. I steadfastly believe that the future of investments is in the private market.
BlackRock’s vocal endorsement of private markets is a clarion call for financial advisors to evolve and meet this moment. By deepening their understanding of private assets, diversifying their offerings and educating clients, advisors can differentiate themselves while providing enhanced value in this new investment era. Embracing this shift is not just about staying competitive. It’s about leading the way in democratizing access to investment opportunities for all.
Not all pre-IPO companies will go public or be acquired, and not all IPOs or acquisitions are or will become successful investments. There are inherent risks in pre-IPO investments, including the risk of loss of the entire investment, illiquidity, and fluctuations in value and returns. Investors must be able to afford the loss of their entire investment.
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