The challenge facing institutional investors increasingly centres on overcoming the operational friction that can hinder long-term success. Fulcrum Asset Management’s Matthew Roberts explains why implementation has become the next frontier.
Institutional investors have largely settled the debate over whether private markets deserve a place in long-term portfolios. The focus is now shifting to a more practical question: how do investors build programmes that consistently deliver the outcomes they are seeking? Governance, manager selection, liquidity and fund structures can all determine whether a private markets allocation succeeds over the long term.
Private Markets Profile spoke to Matthew Roberts, partner and head of alternative solutions at Fulcrum Asset Management, about why implementation is becoming the defining challenge for institutional investors.
Private markets have become a much bigger part of institutional portfolios. What are the biggest sources of friction investors still face?
Roberts: Private markets present a different level of complexity from traditional asset classes. Investors are dealing with issues such as governance, manager selection, legal structures, liquidity and fee transparency, all of which require careful planning and robust decision-making.
One of the biggest challenges is having confidence in the information you’re using. Before investors can identify the right managers, they need reliable data, a clear understanding of performance and the ability to assess how managers have generated returns across different market environments. Given the dispersion of returns in private markets, those foundations are critical.
The same applies to costs. It’s important to understand not just headline management fees but how carried interest and other portfolio costs affect long-term returns. Ultimately, successful private markets investing isn’t simply about accessing attractive opportunities; it’s about putting the governance, expertise and long-term partnerships in place to navigate complexity over many years.
Investors need to understand managers in depth, assess operational capabilities and look beyond headline performance.
Matthew Roberts
Many people assume scale is the key to successful private markets investing. Why do you believe governance is often more important?
Roberts: Scale undoubtedly creates opportunities, but it isn’t the defining factor. We’ve worked with relatively small charities and endowments that have exceptionally strong governance and clear decision-making frameworks, while larger organisations don’t automatically overcome the practical challenges simply because they have more assets.
Good governance is about understanding where risks lie, asking the right questions and recognising where specialist expertise can add value. The strongest investors aren’t necessarily those with the biggest portfolios; they’re the ones that make consistently good decisions over long periods.
The relationship between investors and advisers is also key. Rather than simply providing products, the best partnerships are collaborative. You’re working together to solve problems, refine portfolio structures and improve outcomes over time. Investing is probabilistic rather than deterministic, so there is always an opportunity to learn and improve.
How can institutional investors reduce the friction associated with private markets – from manager selection and fund structures to liquidity and governance?
Roberts: It starts with recognising that there isn’t a universal solution. Every institution has different objectives, governance arrangements and liquidity requirements, so implementation needs to reflect those individual circumstances.
Rigorous due diligence is fundamental. Investors need to understand managers in depth, assess operational capabilities and look beyond headline performance. From there, they can build portfolio structures that reduce unnecessary complexity, whether that’s negotiating more appropriate terms, improving flexibility around capital deployment or designing investment vehicles that better align with governance requirements.
There isn’t a point where you can say you’ve ‘solved’ private markets. Markets evolve, portfolios evolve and institutions evolve. Hence, the decision making process needs to gradually evolve too.
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The traditional endowment model has shaped institutional investing for decades. Does it still provide the right blueprint for private markets?
Roberts: The endowment model remains highly relevant because its underlying principles are timeless. Long-term thinking, disciplined governance and the ability to look beyond short-term market movements remain valuable strengths when investing in private markets.
The way the endowment model might translate into portfolios today is likely to be quite different compared to a generation ago. For example, building exposure to a collection of ideas that provide resilience to economic or environmental shocks has become increasingly relevant. Themes include food security, energy security, healthcare, education and urban renewal.
It’s also fair to say that a single portfolio is unlikely to meet the needs of each individual institution.
Looking ahead, where should institutional investors focus as private markets continue to evolve?
Roberts: I think we’re entering a new phase. For many institutional investors, the question of whether to invest in private markets has largely been answered. The challenge now is execution.
That means continuing to strengthen governance, improve data and reporting, refine portfolio construction and build partnerships that can evolve alongside investors’ requirements. Technology also has an increasingly important role to play in helping investors analyse information more effectively and reduce some of the operational complexity that has traditionally accompanied private markets.
Ultimately, the institutions that are most successful won’t necessarily be those with the largest allocations. They’ll be the ones that continue to learn, adapt and refine their approach over time. The debate has moved from making the case for private markets to delivering better outcomes through successful implementation.