Two Roads into Private Markets: Why Some UHNW Families are Taking Both
For ultra-high-net-worth (“UHNW”) families and family offices, the focus has shifted from whether to include private markets to how to do so most effectively. As private asset allocations grow worldwide, two specialists from Stonehage Fleming's private markets team, Head of Private Capital, Mat Powley, and Head of Private Markets Advisory, Richard Hill, responsible for direct investments, emphasise that the right entry point into private equity is as critical as the decision to invest.
Why private markets, and why now
The appetite for private market assets has become more structural rather than cyclical. Public equities and bonds, once the reliable counterweights of a balanced portfolio, have increasingly moved in tandem. For families seeking genuine diversification, private markets offer something meaningfully different: lower correlation with listed assets and access to value creation that public markets simply cannot replicate.
"There are parts of private markets that we believe are relatively more compelling than others," says Powley. "Not only do alternatives offer that diversification benefit, but within them, there are real pockets of opportunity and value - and areas of genuine risk. Helping clients navigate that distinction is critical."
The less transparent nature of private markets and the relative scarcity of independent research make informed guidance essential. Unlike liquid strategies, where a poorly performing manager can be exited swiftly, private market commitments are long-term and largely illiquid. Thorough due diligence before entry is the primary risk-management tool for investing in private markets.
The fund route: systematic, diversified, designed for families
Private equity funds make private equity more accessible and navigable for family investors and are designed to address the specific friction points that typically frustrate private wealth investors: the J-curve effect, opaque fee structures, administrative complexity, and a lack of transparency around capital deployment.
Powley notes that the lower- and middle-market segment of the private equity universe has historically offered higher return potential and deeper value-creation opportunities compared with the large- and mega-cap space.
"A private equity fund portfolio is not meant to shoot the lights out," Powley explains. "It is meant to deliver consistent, attractive returns over the long term, a compounding instrument for families who have, by definition, a perpetual investment horizon."
For investors seeking a professionally managed, systematically constructed entry into private markets without the complexity of selecting individual deals, the fund route offers precisely that: a diversified, institutionally rigorous portfolio built over time. Key risk management considerations include the possibility of capital loss and the understanding that private market assets are more complex and less regulated than public investment vehicles, making them most suitable for professional or more sophisticated investors.
The direct route: conviction, control, and higher potential returns
Direct private investments in individual companies on behalf of families typically target higher net returns. The appeal to UHNW investors is not only financial; direct private investments also resonate on a psychological level.
"There is an intellectual curiosity element to direct investing," Hill notes. "Particularly for successful founders and entrepreneurs who have exited their businesses and are reinvesting the proceeds of this. These are people who are used to making decisions, and the psychology of ownership appeals to them."
Direct deals allow families to invest in sectors and businesses they understand intimately, potentially in industries where they have built their own wealth. The returns can be higher, but so is the risk profile: single-deal exposure means that concentration risk is real, and diligence, both before and after investment, is paramount.
The case for combining both
Both Powley and Hill argue that there is a compelling case for families to integrate both approaches into a single, cohesive private markets strategy.
Accessing private markets through funds provides a stable, diversified core with steady compounding, serving as the long-term basis for a private market allocation. Direct private investments introduce a satellite layer characterised by higher conviction, greater potential returns, and engaged entrepreneurial clients. Combined, they form a portfolio that reflects the well-known public market approach, a core-satellite structure, but applied to private assets.
"Sometimes one entry point into private markets resonates better with a particular family," says Powley. "Sometimes the two combined are complementary. Our job is not to push either approach. It is to understand the family's circumstances and provide the solution that fits best."
Navigating a more competitive landscape
As private markets attract growing attention from a wide range of providers, the differentiators are increasingly about track record, access, and discipline. Powley points to the firm's decade-long presence in the space, its relationships with fund managers across the US, Europe, and Asia, and its vigilance around market cycles as the foundations of its private equity fund proposition. Hill highlights the importance of proprietary deal flow and network depth in sourcing direct opportunities that clients would be unlikely to access independently.
For UHNW families exploring private markets for the first time, or reviewing an existing allocation, there are genuine opportunities to consider. The key question is often not which single route to pursue, but whether a combination of approaches may be appropriate.
Products and services may not be available in all jurisdictions or to all client types.
Past performance is not a guide to future performance.
Private market investments are not regulated or authorised by the Financial Conduct Authority and nor are the underlying investments. Such unregulated investments can often be more complex and have less/no regulatory protection. Investments in private market investments involve a high degree of risk and are only suitable for investors who fully understand and are willing to assume the risks involved.
Approved for issue in South Africa by Stonehage Fleming Investment Management Ltd, authorised and regulated in South Africa by the FSCA, FSP No. 46194 and Stonehage Fleming Advisory Ltd, authorised and regulated in South Africa by the FSCA, FSP No. 52580.
© Stonehage Fleming 2026.
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