Global wealthtech and decision-science firm Capital Preferences has released a white paper identifying a $6.9 trillion shortfall in private-market allocations among U.S. accredited investors.
The report argues that the greatest barrier to private-market adoption is not access or product design. Instead, it’s the industry’s limited insight into how investors weigh risk, reward and liquidity, which creates an enormous gap between how much clients could invest in private markets and what they actually do.
The firm says closing the behavioral-alignment gap could raise accredited investors’ private-market allocations from about 5% to roughly 17% on average, with ranges from low single digits to as high as 40%. That shift equates to about $6.9 trillion in additional assets if firms align offerings with what clients are comfortable with.
“Private markets represent one of the most important growth frontiers and client service opportunities in modern investing, yet the industry continues to treat client discovery as an unengaging, tick-the-box exercise instead of a means to meet more client needs,” said Bernard Del Rey, founder and chief executive officer of Capital Preferences.
The study draws on research from Shachar Kariv, Ph.D., an economics professor at the University of California, Berkeley. Kariv is also co-founder of Capital Preferences. The firm’s platform uses gamified decision activities to capture what it describes as a client’s economic fingerprint, a multidimensional view of how clients approach a range of variables including goals, risk, private markets, values, retirement income, tax and service preferences.
“Understanding how each investor resolves trade-offs is central to economics and should be central to personalized portfolios and financial advice,” Kariv said. “Behavioral finance describes patterns after they occur. Decision science allows us to anticipate them and respond by designing better solutions.”
