BlackRock mulls new vintage of private capital products for sophisticated retail investors in Europe

Lockhart hopes to “double the number of investors” for 2023’s upcoming strategies from the incumbent ELTIF private capital funds, which raised EUR 1bn collectively over the past two years, he said.

BlackRock has seen “positive…early indications” that it can double investor numbers for the 2023 vintages, thanks to growing interest from private and retail banks in Europe seeking to offer ELTIFs to their clients, he said.

Following these launches, the firm is contemplating new strategies including multi-alternatives products that combine private equity, private credit and real assets into a single vehicle under the European Long-Term Investment Fund (ELTIF) scheme, he said.

Other strategies in the pipeline could include the next generation of private equity and private infrastructure funds targeting such investors, he said. The firm typically launches new strategies roughly every two years.

“Our clients expect us to bring the same strategies back with predictable frequency,” he said. “When we launched our private equity fund and our private infrastructure fund in 2018, they expected us to bring the next vintages on the back of that every 18 to 24 months.”

Last December, it secured EUR 415m in commitments for its Private Infrastructure Opportunities European Long Term Investment Fund. In 2021, it raised EUR 509m for Private Equity Opportunities Eltif.

BlackRock is aligning its bet on retail appetite for private assets, with investors wanting to diversify away from the classic 60:40 equity-bonds investment portfolio, which has performed poorly in recent times. “You need to go no further than 2022 to see that many investors experience not only losses in stocks, but also bonds, which is an uncommon occurrence,” he said.

Citing a study by consultant Oliver Wyman, Lockhart said that private markets investments could grow up to USD 17tn over the next five years from the USD 10tn today. Of the USD 7tn increments, USD 3tn is expected to be invested by the wealthy retail clients, he said.

“When we first invested in ELTIFs in 2018, we didn't know how fast the category was going to grow - we believed it would grow, but like every other new vehicle, it takes time for people to get comfortable with it, to embrace it and to adopt it,” he said.

“Now that's happening, we see more and more wealth managers asking us and others to offer ELTIFs,” he added.

Lockhart acknowledges, however, that the risk-off sentiment in public markets over the past few months has trickled down to sentiment on private markets, making fundraising more difficult. This is not limited only to BlackRock, but across the industry, he said.

“The question many wealth managers are thinking about now is whether they see a pickup in risk in 2023, and if so, will that happen in the first half of the year or in the second half of the year? Time will tell,” he said.

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