By Tom Douie, founder and CEO of Private Markets Alpha
For years, the UK has grappled with the idea of opening private markets to a broader base of wealth investors. Policymakers have pushed, platforms have experimented, and asset managers have launched new product in pursuit of the same goal: scalable access to private assets beyond institutions.
Yet progress has been uneven at best. Investment trusts with private asset portfolios have historically traded at steep discounts to net asset value (NAV), while recent data shows long-term asset funds (LTAFs) have yet to achieve meaningful traction on wealth platforms – around 40 LTAFs and an AUM of £7.3bn.
These are often framed as separate problems, but they are symptoms of the same underlying issue: the industry has often prioritised product wrapper design ahead of fully resolving distribution pathways.
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Specifically, a mismatch between the operational constraints of managed portfolio services (MPS) and the design of private markets fund access points creating a true bottleneck.
Such a sequencing error has held the market back, but on the flipside, it explains why the UK could be on the cusp of a genuine breakthrough – and why exchange-traded notes (ETNs) could provide the catalyst.
False start: Product before pathway
The traditional asset management product development mindset begins usually starts with an investment strategy, selecting a structure (such as an investment trust, an LTAF) before attempting to engage with the distribution ecosystem.
Private assets introduce operational complexity: think subscription processes, liquidity constraints, valuation timing, and regulatory nuances. By contrast, wealth platforms are built for simplicity, standardisation, and scale; so, when a product is designed without fully accounting for how it will flow through those platforms, friction is inevitable.
For public markets such sequencing can work but in private markets, it consistently breaks down, which is arguably what we are seeing today.
Problems solved; problems created
Investment trusts have long been the UK’s default apparatus for listed exposure to private markets and while they solve the issue of accessibility, they introduce a more problematic dynamic: the potential for such assets to trade at significant discounts (and sometimes premiums to NAV).
For investors seeking private markets exposure, returns become entangled with secondary market sentiment. Discounts widen not because of underlying portfolio performance, but because of liquidity imbalances, macro uncertainty, or shifts in investor appetite. The result is a distorted experience where the behaviour of the wrapper dominates the behaviour of the asset. In other words, the distribution pathway works, but the investment outcome is compromised.
See also: Morningstar finds three quarters of investors still have no private markets exposure
At the other end of the spectrum, LTAFs were designed to address precisely these shortcomings. Their structure is better aligned with the long-term, illiquid nature of private assets. Theoretically, they should be the ideal solution, however in practice, adoption has been slow.
The primary reason for this is that wealth platforms are not naturally configured to accommodate LTAFs at scale, with operational processes, custody arrangements, and client onboarding requirements introducing friction at multiple points. This results in the inverse of the investment trust problem, the investment experience is improved, but the distribution pathway struggles to function efficiently.
ETNs: The friction-free bridge
Viewed together, the issues facing investment trusts and LTAFs reveal a common root cause. In both cases, the industry started with the wrapper and relied on the distribution ecosystem to adapt. Wealth platforms are infrastructures with deeply embedded operational guide-rails. They favour instruments that behave like securities and daily priced funds; ignoring this reality has led to the challenge the UK market now faces.
ETNs occupy a unique position, they are securities (ie fully compatible with platform infrastructure) but can be structured to deliver exposure to private market strategies.
This dual nature is critical because they integrate seamlessly into existing distribution systems. ETNs can be held in custody accounts, processed through standard trading workflows, and reported alongside public market holdings. So, from a platform perspective, they are familiar.
At the same time, they can be designed to reflect the economics of private markets. Subscriptions and redemptions can occur at net asset value rather than through continuous secondary market trading – this removes the premium/discount dynamic that plagues investment trusts. They work with the grain of existing infrastructure while preserving the characteristics that make private markets attractive in the first place.
In effect, ETNs combine the operational simplicity of listed instruments with the investment integrity of private market structures. ETNs are not a new investment instrument by any means but built specifically for exposure to private markets within the envelope of consumer duty, potentially delivers the best of both worlds.
Why now?
Every market evolution needs a tailwind. And now we are not seeing one catalyst but many. Indeed, three conditions within the UK market have shifted in the past three years, making now the time for ETNs:
- The FCA’s 2025 shift to allow retail access to ETNs, combined with their integration into tax-advantaged wrappers like ISAs/pensions, demonstrates the breadth of potential applications for ETNs and has created a regulatory catalyst that can extend efficiently into private markets without requiring bespoke structures.
- Platforms are more engaged and the limitations of existing approaches are now well understood, they are seeking solutions that they can plug-and-play, rather than a process overhaul.
- Distribution dynamics are increasingly important – there is a growing appreciation that distribution is not an afterthought, but a core determinant of product design.
In short, the democratisation of private markets in the UK has been delayed, not denied, and the pieces are in place if we assemble them in the correct order. The lesson is clear: choosing the wrapper first creates friction whereas prioritising the nuances of the distribution pathway leads to flow.
By aligning with the existing functions of wealth platforms, ETNs offer a practical route to scale. They are not a silver bullet, as no single structure ever is, but they may be the most effective bridge yet between private market supply and wealth platform demand.
If the industry embraces a distribution-led approach, the UK’s long-awaited moment for private markets democratisation may finally be coming into view.
