What Do Private Banks Actually Offer? Investment Products Explained

The entry point into private banking — the asset minimum, the relationship tier, the name on the door — is widely discussed. What is less often explained is what a private banking relationship actually provides in terms of investment capability. The gap between a well-informed retail investor using an online broker and a private banking client is not simply one of fees and formality; it is a genuine difference in the range of products, the quality of execution, and the depth of advice available.

This guide explains the core investment products that private banking relationships make accessible — and why they matter for high-net-worth and internationally mobile investors.

The Core Distinction: Retail Versus Private Banking

A retail investor using a standard online broker can access equities, conventional bonds (usually through funds), ETFs, investment trusts, ISAs, and SIPPs. This is a wide and genuinely useful investment universe — and for many investors, it is sufficient.

A private banking client accesses that same universe plus:

• Direct bond purchase (individual gilts, corporate bonds, emerging market bonds)
• Structured products created by the bank's treasury desk
• Private equity and private credit fund access
• Pre-IPO and private placement opportunities
• Hedge fund access
• Discretionary portfolio management with a tailored mandate
• Bespoke tax-efficient wrappers
• Family office services for complex multi-generational wealth

The private banking relationship is not primarily about the banking current account (which you also receive, typically on generous terms). It is about access to the investment infrastructure.

Discretionary Portfolio Management

Discretionary portfolio management (DPM) is the flagship offering of most private banks and is how the majority of private banking clients hold their investable assets.

How it works: You and the bank's investment team agree on a mandate — a set of instructions governing how your money is to be managed. The mandate specifies:

• Investment objectives (growth, income, preservation, balanced)
• Risk tolerance (conservative, moderate, growth-oriented)
• Time horizon
• Liquidity requirements (e.g., you may need to access 20% of the portfolio within one month's notice)
• Excluded sectors or instruments (ethical exclusions; tax-driven exclusions; personal preferences)
• Currency base and currency constraints

Once agreed, the bank's investment team manages the portfolio within the mandate without requiring your approval for individual trades. They monitor markets, make asset allocation decisions, select underlying securities or funds, and manage risk — on an ongoing basis.

What you receive: Quarterly (or more frequent) portfolio reports showing performance, holdings, asset allocation, and comparison to relevant benchmarks. Access to your relationship manager for questions or mandate changes. An annual review meeting.

Fees: Typically 0.5–1.5% of assets under management per year, either as an all-in fee (covering the management fee and all underlying fund costs) or as a management fee exclusive of underlying product costs. At the higher end of wealth (£5 million+), fees are often negotiated. Performance fees exist on some mandates but are less common in UK private banking than in the hedge fund world.

Benchmark: Your portfolio should be measured against an appropriate benchmark for the mandate. A balanced portfolio might be benchmarked against a composite of global equities and bonds; a conservative income mandate against a short-duration bond index. Request the benchmark clearly before signing the mandate.

Advisory Portfolio Management

In advisory management, the bank provides recommendations but requires your approval before executing any trade. You retain full control.

This is appropriate for clients who:

• Are actively engaged in investment decisions and want to maintain oversight
• Have specific views about individual securities
• Prefer lower management fees (advisory typically costs less than discretionary)
• Are in a transition period or have complex tax considerations that require case-by-case decisions

The trade-off is time and attention: advisory management requires your active participation. If you travel frequently, are time-poor, or prefer to delegate, discretionary management is more practical.

Direct Bond Access

This is one of the clearest examples of an investment product that private banking genuinely makes accessible and that retail investors struggle to replicate.

What it means: Private banking clients can buy individual bonds — UK government gilts, corporate bonds, supranational bonds, emerging market sovereign bonds — directly. Not via a bond fund, which pools your money with other investors and charges an annual management fee, but by actually holding the bond in your own name (or your account).

Why it matters:

• Direct bond holding gives you certainty about duration and maturity — you know the bond will return its face value at the maturity date (barring default).
• You can structure a "bond ladder" — a portfolio of bonds maturing at different dates — to provide predictable income and capital return.
• You avoid fund manager fees on the bond component of your portfolio.
• You have direct credit exposure to the issuer (which requires credit assessment), rather than diversified exposure via a fund.

Minimum lot sizes: Most individual bonds have minimum lot sizes of £50,000–100,000 face value. This is why direct bond access requires a significant portfolio — it takes a portfolio of £500,000+ to hold a sensibly diversified selection of individual bonds.

Gilt access: For UK investors, gilts (UK government bonds) are available directly from the UK Debt Management Office's retail platform (Gilt Purchase and Sale Service) — but the private banking route provides more flexibility, including secondary market access and a wider range of maturities.

Structured Products

Structured products are financial instruments designed to achieve specific risk/return profiles that cannot be replicated by simply buying equities or bonds outright. Private banks create or source these through their treasury desks or in partnership with investment banks.

Common structures:

Capital-protected notes: You invest £100,000 for a fixed term (typically three to six years). At maturity, your capital is returned in full regardless of market performance. In addition, you participate in a percentage (the "participation rate" — typically 80–130%) of the growth in an underlying index (FTSE 100, S&P 500, or a bespoke basket). If the market falls, you get your money back but nothing more. If it rises 30%, you receive £130,000 (at a 100% participation rate). The protection is provided through an embedded zero-coupon bond; the participation is achieved through a call option.

Yield enhancement structures: Instead of capital protection, you receive a higher income (coupon) in exchange for accepting specific downside risks. A common form is an autocall or "kick-out" product: you receive a coupon each year, and if the underlying index is above its starting level at a specified observation date, the product matures early ("autocalls") and you receive your capital back with accumulated coupons. If the index falls below a "barrier" level (often 50% of the starting level), you lose proportional capital.

Bespoke mandates: For large private banking clients, the bank's treasury desk can create entirely bespoke structures — with terms tailored to specific objectives, tax efficiency needs, or investment views. These are not catalogue products; they are negotiated.

The minimum: Structured products in private banking typically require a minimum investment of £100,000–250,000 per structure. They are investment-grade products but are complex and carry counterparty risk (to the bank issuing the structure). Understanding the full risk profile requires careful analysis.

Private Equity Access

Private equity funds invest in companies that are not publicly listed — either buying out mature businesses, funding growth-stage companies, or investing in distressed situations. Historically, private equity has delivered strong long-term returns (though with significant variability by manager and vintage year), with less short-term price volatility than public markets (because there is no daily market price).

The challenge for individual investors: Most institutional-quality private equity funds have minimum commitments of £1–5 million, a ten-year lockup, and require investors to be classified as professional or sophisticated. These barriers exclude retail investors.

How private banks provide access: Private banks pool client capital and invest at institutional scale, providing clients with access to curated fund selections at lower minimums (typically £100,000–500,000 per fund). The bank's investment team conducts due diligence on the fund managers. Some banks offer their own private equity vehicles.

The illiquidity consideration: Private equity is genuinely illiquid — capital is drawn down over three to five years as the fund invests and returned over seven to ten years as investments are exited. Investors should only allocate capital they do not need within the fund's life.

Private Credit

Private credit (also called direct lending) involves lending to companies outside the public bond market — typically mid-market businesses that cannot access public capital markets. Private credit funds earn a yield premium over public bonds, reflecting the illiquidity and reduced information available on non-listed borrowers.

Private credit has grown substantially since the 2008 financial crisis, as banks reduced direct lending to mid-market companies, and specialist private credit funds filled the gap. Returns of 8–12% per year have been common in recent years (though this will vary with market conditions and defaults).

Private banks provide access to private credit funds on similar terms to private equity: minimum commitments, some illiquidity, curated fund selection.

Hedge Fund Access

Hedge funds are pooled investment vehicles that use a range of strategies — long/short equity, macro, arbitrage, event-driven, and others — with the aim of generating returns uncorrelated to equity markets. They charge high fees (typically "2 and 20" — 2% annual management fee and 20% of profits), require investors to be classified as sophisticated or institutional, and have high minimum commitments.

Private banks can provide access to hedge fund investments that would otherwise be inaccessible to individual investors. The bank's team typically vets funds for operational risk, strategy quality, and manager track record before making them available to clients.

Important note: Not all hedge funds outperform. The industry has a wide distribution of outcomes. Due diligence on the specific manager, strategy, and fee structure is essential. Private banking clients should ask their bank how they select hedge funds for the platform and whether there are conflicts of interest (e.g., whether the bank earns a distribution fee from the fund).

Pre-IPO and Private Placement Opportunities

For ultra-high-net-worth private banking clients, banks occasionally provide access to pre-IPO investment rounds or private placements — the opportunity to invest in a company's shares before it lists on a public exchange.

These are typically available to institutional investors and the most significant private banking clients. The potential return is high — if a company's IPO values it significantly above the private placement price, early investors benefit. The risk is also high — companies may delay, cancel, or price IPOs below expectation, and pre-IPO shares are illiquid until the listing occurs (and often subject to a lockup period thereafter).

Discretionary Wealth Planning Services

Beyond investment products, the most comprehensive private banking relationships include:

• Tax planning and estate planning advice (in coordination with specialist advisers)
• Trust and foundation structures for wealth transfer
• Philanthropic advisory services
• Art and collectibles advisory (some private banks)
• Family governance frameworks for multi-generational wealth

These services are typically available to private banking clients with £5 million+ in assets and represent the genuine differentiator of the private banking relationship from a simple investment management service.

Compliance and Important Caveats

All investments carry risk. Values of investments can fall as well as rise, and you may get back less than you invest. Private equity and private credit are illiquid — you should not invest capital you may need in the short term. Structured products involve counterparty risk — if the issuing bank fails, structured product holders rank as unsecured creditors. Hedge funds can lose value and have done so significantly in past market dislocations. This guide provides an overview for information purposes only and does not constitute financial advice. Always consult a qualified independent financial adviser before making significant investment decisions. Fees, minimum investments, and product availability vary by institution and change over time.

How Global Investments Can Help

Global Investments works with high-net-worth and internationally mobile clients on wealth structuring and private banking introductions across the UK, Europe, the Gulf, and Asia. We can introduce you to private banks and wealth managers appropriate for your asset level, objectives, and multi-jurisdictional profile — whether you are entering private banking for the first time or consolidating relationships. Contact us to discuss your wealth management requirements.