Unlocking talent for the new era in private markets
As the client base for private markets investment continues to increase, so must the expertise of the industry. Fundamentals like valuation and due diligence are still key.
Private markets are one of the fastest growing investment allocations today. From less than USD4 trillion at the time of the global financial crisis of 2008, private market assets under management are estimated at about USD15 trillion today.
This sharp growth has been accompanied by a democratization of private markets, as retail investors increasingly demand access to opportunities once reserved for institutions.
Insights gathered by CFA Institute from conversations with employers in the industry found that there is a need for deeper private markets exposure in professional learning today.
Bridging two worlds
The demand for private market skills is concentrated in two areas. The first is private market firms themselves, who increasingly need professionals with valuation and modelling expertise. And they will be able to deliver more value if they are also familiar with the private wealth landscape and understand investor priorities.
The complementary need is at wealth managers and financial advisory firms, who need to understand how private markets work so they can advise their clients on the best opportunities.
This means that professionals with cross-sector knowledge will be in the greatest demand in both fields as they will have the potential to bring their expertise to product development and advisory services.
Learn more about CFA Institute’s Private Market certificates.
The ‘need to know’ is changing
The demands of end-investors are changing today in ways that affect the learning needs for professionals in private markets. The democratization of the asset class is reshaping the profile of participants, as regulators make it easier for people to access opportunities through semi-liquid structures.
As a result, the private market asset class is moving from being a niche, rarified allocation to one that attracts the attention of a broad client base. That shift pushes the sector closer to the day-to-day for wealth managers and investment professionals.
As BlackRock has noted, investors are increasingly taking “a whole-portfolio approach” that blends public and private assets. This means that as well as expertise in the fundamentals of private markets, an understanding of the intersection and interaction of public and private is also critical to effective modelling and advice today.
Learning priorities
The kind of knowledge that firms prize today is hands-on, skills-based, and practical, rather than theoretical and abstract. It should reflect the actual roles that professionals have in their firms, not simply cover the waterfront of underlying principles.
Our industry conversations suggest that the nuts and bolts of modelling, valuation, due diligence and scenario analysis are priorities. Senior practitioners can be deployed as mentors or to explore live case studies. Time-poor teams prefer short sessions that are focused on a specific element.
Sales and client-facing teams are most often identified as having the most to gain from familiarity with the language of the private markets asset class, while investment teams and asset allocators need in-depth knowledge of governance, risk and valuation.
Within the asset class, the primary need remains generalist understanding of the entire landscape, followed by structures and due diligence in private equity and venture capital.
We also see interest rising in gaining expertise in private debt. And while learning for real assets and infrastructure is still seen as niche, it is important for pension funds and insurers.
This article is part of our series featuring insights from investment management firms on transforming L&D strategies. Discover how industry leaders are tackling talent development challenges and building capabilities for the future.
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