Private assets: demystifying the $15 trillion asset class
October 05, 2026
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6 min
Julien Dauchez
Head of Portfolio Consultants / Advisory – Natixis Investment Managers Client Solutions Group
In this Q&A, Julien Dauchez, Head of Client Solutions Group at Natixis Investment Managers, dissects the forces driving the $15 trillion private market, the operational complexities of its "retailisation," and the analytical tools needed to manage real risk, valuations, and manager selection.
The global rise of private markets and retailisation
Q: Global private markets assets under management are evaluated at $15 trillion today. And this market is forecast to double within not even ten years from now.1 What are the main reasons why investors are shifting their allocation to private markets?
Julien Dauchez: You first have to differentiate investors by investor type. Institutional investors have been investing in private equity, infrastructure, or private real estate for a long time. The Great Financial Crisis was basically an accelerator of this trend, where banks were retreating from private lending, opening up space for a new activity which those institutional investors were looking for.
Now, what we have been seeing lately is the retailisation of private markets. It is a very gradual move. It started some time ago in the US; it is now crossing the Atlantic and we see a lot of traction here in Europe. Essentially, investors have realised that private capital gives access to a new pool of investments, new sources of return, and new sources of diversification that they cannot find elsewhere.
Also, we should mention the role of the authorities. Here, the EU has been facilitating access for private investors with the revised ELTIF 2.0 (European Long-Term Investment Fund) framework, with the idea of offering a channel for retail investors to get into private assets. This is also due to the fact that the EU wants, also politically, to boost growth in Europe. Close to 300 billion euros cross the Atlantic each year to be invested into US assets2. This money could be put to work here in Europe to bring infrastructure, growth, and also diversification for investors.
Resolving the liquidity and distribution mismatch
Q: Looking at the industry, we have easier access to private markets now through the ELTIF 2.0 wrapper, but we still see big hurdles in terms of actually rolling it out. What are your key takeaways here?
Julien Dauchez: In Europe, retailisation is facing two main hurdles:
- The liquidity mismatch: Most investors on the mass retail side have not fully grasped the concept of illiquidity and the fact that they may not be able to retrieve that capital right away. A lot of education has to be done. This is unlike pension-related and other long-term savings products, where you have a very natural alignment of the investment horizon with that of private assets.
- The distribution model: In the UK for instance, most of the model portfolios that investors have access to online, do not have a private asset sleeve because it is very difficult to rebalance a private asset component in a liquid model portfolio. What we are seeing now is a move towards a dedicated sleeve that comes in addition to the traditional 60/40 model portfolio.
Investor DNA and strategy preferences
Q: Looking at the data, what are the key trends in asset class and sub-asset class preferences? And would you distinguish between institutional and retail behaviour?
Julien Dauchez: On the retail side, it is a very nascent industry, mainly about private equity and some private credit. If you look at the institutional investor type, you can quite easily see a DNA connection between the nature of the investor and the nature of the private assets they favour:
- Family Offices have a natural bias towards private equity. If you are one of the founders of these privately held companies, it will be most natural for you to construct a long-term strategy of investing in the private segment you have been operating in.
- Sovereign Wealth Funds have been long-standing investors in infrastructure. If your state wealth comes from oil, like Norway, you have a good knowledge of extraction, refining, and distribution infrastructures. Infrastructure is also intrinsically fantastic against inflation because user-pay cash flows, like tolls coming from a paying road or bridge, are adjusted for inflation, ie prices increase over time for users (therefore revenues for investors).
- Insurance Companies are fond of private credit because it is a floating rate base, it offers capital matching, and benefits from a favourable treatment within the European framework for capital ratios (Solvency II).
“Volatility laundering” and private market risks
Q: Public markets have been quite bumpy, while illiquid investments look less volatile over the long term. But some argue these are not marked to market, referring to private markets as a "volatility laundering machine". How do you actually model the real volatility, the real risk behaviour of those asset classes?
Julien Dauchez: It is fair to say that each strategy has its own valuation approach. Infrastructure is contractual: discounted cash flow is a well-accepted method. Private equity, however, tends to be marked to model, meaning that internal valuations made by the GP (the fund manager), tend to be the basis for valuation.
When working with investors, in particular individual investors, we use what we call de-smoothing techniques. We believe that the best way is to make sure that the reality of the risk, in particular when it comes to private equity, is properly reflected in the portfolio. By adding synthetic valuation points to remove the smoothing phenomenon, we get a better and more accurate assessment of the volatility and correlation of these strategies.
Q: There has been some concerns about the private credit space this year. How much stress can this asset class handle? Have allocators trimmed down their exposure?
Julien Dauchez: Most of the negative publicity we have seen, especially in the first semester this year, was about semi-liquid or evergreen funds in the private credit space. More specifically, this related to one sector and geography: the US, and the SaaS sector (software as a service). Generative AI was perceived by market participants as a threat to software, triggering redemptions in private credit funds financing these software companies. The question mark being: what happens when all these companies have to refinance further down the line?
As a result of that, what we see when speaking to investors is, first, they want to assess their current exposure to private assets. Second, it is estimated that 25% of US private credit has been lent to SaaS companies3. So, we have been working with investors to stress testing their private credit exposures to get a better understanding of the liquidity buffers that could be needed and to forecast what the different scenarios could look like.
Navigating GP dispersion and active selection
Q: In public markets, manager dispersion is not always huge. But in private markets, it is highly relevant. What are the key metrics that investors watch out for? Is it all about branding and scale, or can smaller boutiques still win?
Julien Dauchez: We are firm believers in active management, where differentiated investment decisions lead to differentiated returns vs the markets. If you take the US large cap space, the dispersion between the best and the top decile is around 10%, meaning that there is still room to deliver alpha and to deliver performance. But if you look at the illiquid side of the investing spectrum, venture capital has a dispersion which is twice that, meaning that between the top quartile and the bottom quartile you have a 20% annualised performance difference per year. Hence the importance of picking the right manager.
Based on our discussions, clients tend to favour managers who have been through many different credit cycles and economic downturns. They look at the capital distributions actually paid out to investors to see if it matches expectations. They put a lot of emphasis on deal sourcing, ie the ability to find unique deals that make sense. Just as importantly, they scrutinise how the manager exits the investment and how they actually bring value add to make the company more synergetic, more profitable, and redirected for growth.
Erasing the blind spot
Q: To conclude, what is the biggest blind spot for investors who are relatively new to the asset class, and what would be your number one advice?
Julien Dauchez: One of the key concerns that we hear from investors when adding private assets is visibility or clarity. This connects to all of our previous points: de-smoothing the risk to realise exactly what investors have in their portfolio, and understanding exposures (private credit's connection to the software sector is a good example of that). Bring clarity to investors, help them build confidence, so that they can proceed with private market investments in an informed way.
1 Source: Preqin, Private assets in 2030.
2 Source: EU and Association Francaise de Gestion (AFG).
3 Source: Preqin, Daily Shot.
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