Key Takeaways
- • According to a new HSBC Private Bank survey, private equity and venture capital holdings among wealthy entrepreneurs are approaching levels comparable to their public equity ownership.
- • Half of existing private equity fund investors plan to increase their holdings over the next 12 months.
- • Sixty per cent of Gen Z entrepreneurs with direct private company holdings intend to increase them, versus 44 per cent of Gen X.
- • CapGen founding partner Charlotte Thorne argues that fund selection is critical given wide return dispersion among private equity managers, and that direct investments and blind pool funds should be treated as distinct asset classes.
- • HSBC's Mathieu Forcioli cautions that entrepreneurs' confidence in their own judgment can create blind spots around concentration, valuation and liquidity risk.
Summary
Private equity and venture capital holdings among wealthy entrepreneurs are approaching levels similar to their public equity ownership, according to a new survey from HSBC Private Bank. The survey points to private markets becoming an increasingly mainstream part of investment portfolios, with half of existing private equity fund investors planning to raise their holdings over the next 12 months.
HSBC's Mathieu Forcioli, global and Asia-Pacific head of alternatives, wealth and premier solutions in Hong Kong, said entrepreneurs are drawn to private businesses because they understand the economics, operating risk and value-creation opportunities of building them. He noted that companies are staying private for longer, so investors increasingly need to look beyond public markets to access fast-growing businesses that create substantial value before an IPO. Entrepreneurs tend to assess opportunities through an "owner's lens," focusing on management quality, path to profitability, customer concentration, operating resilience and exit credibility. Forcioli warned, however, that this experience can create blind spots, leading entrepreneurs to underestimate concentration, valuation or liquidity risks.
Charlotte Thorne, founding partner at Capital Generation Partners (CapGen) in London, said appetite for private equity remains strong among wealthy investors despite the asset class's well-publicised difficulties. She argued that wide dispersion of returns across managers makes fund selection crucial, which requires substantial private markets experience or access to advisers with long industry records. Thorne said direct and venture investments should be viewed almost as distinct asset classes: direct deals offer agency and specialisation but are prone to individual whimsy and demand significant management input, and by definition are not diversifiers. Blind pool funds offer professional management and diversification with less control. She suggested a "barbell approach," carving out a portion of the portfolio for sectors investors know well, with the remainder allocated to a diversified funds approach by style and geography.
HSBC's report also found that 60 per cent of Gen Z entrepreneurs with direct private company holdings intend to increase them, compared with 44 per cent of Gen X. Hannes Hofmann, London-based global head of family offices at HSBC Private Bank, said younger investors' longer time horizons suit the liquidity profile of direct investments, and that they may have better access to digitally native businesses and start-up networks. Forcioli stressed that private market allocations should come from long-term capital rather than money needed in the near term, particularly for entrepreneurs whose operating businesses already represent a substantial illiquid concentration. Capital preservation and liquidity remain major priorities for entrepreneurs, according to the report.
HSBC's Mathieu Forcioli, global and Asia-Pacific head of alternatives, wealth and premier solutions in Hong Kong, said entrepreneurs are drawn to private businesses because they understand the economics, operating risk and value-creation opportunities of building them. He noted that companies are staying private for longer, so investors increasingly need to look beyond public markets to access fast-growing businesses that create substantial value before an IPO. Entrepreneurs tend to assess opportunities through an "owner's lens," focusing on management quality, path to profitability, customer concentration, operating resilience and exit credibility. Forcioli warned, however, that this experience can create blind spots, leading entrepreneurs to underestimate concentration, valuation or liquidity risks.
Charlotte Thorne, founding partner at Capital Generation Partners (CapGen) in London, said appetite for private equity remains strong among wealthy investors despite the asset class's well-publicised difficulties. She argued that wide dispersion of returns across managers makes fund selection crucial, which requires substantial private markets experience or access to advisers with long industry records. Thorne said direct and venture investments should be viewed almost as distinct asset classes: direct deals offer agency and specialisation but are prone to individual whimsy and demand significant management input, and by definition are not diversifiers. Blind pool funds offer professional management and diversification with less control. She suggested a "barbell approach," carving out a portion of the portfolio for sectors investors know well, with the remainder allocated to a diversified funds approach by style and geography.
HSBC's report also found that 60 per cent of Gen Z entrepreneurs with direct private company holdings intend to increase them, compared with 44 per cent of Gen X. Hannes Hofmann, London-based global head of family offices at HSBC Private Bank, said younger investors' longer time horizons suit the liquidity profile of direct investments, and that they may have better access to digitally native businesses and start-up networks. Forcioli stressed that private market allocations should come from long-term capital rather than money needed in the near term, particularly for entrepreneurs whose operating businesses already represent a substantial illiquid concentration. Capital preservation and liquidity remain major priorities for entrepreneurs, according to the report.
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