Investor sentiment towards private markets continues to be positive, despite the continuing challenges of higher interest rates and ongoing macroeconomic uncertainty.
In August, alternative assets data provider Preqin published its Investor Outlook: Alternative Assets, H2 2023. The survey of 178 institutional investors found that while concerns remain around the ability of private asset classes to outperform over the next 12 months, global investors are increasingly targeting private allocations across portfolios to hedge against the persistent uncertainty.
Private equity is one area that is faring particularly well, despite lingering concerns about interest rates, inflation and the ongoing price correction.
According to Preqin’s latest investor survey, a “higher proportion of investors now plan to speed up or maintain allocations over the next 12 months” compared with the same time last year.
Preqin’s Investor Outlook further found that four out of five investors surveyed (80%) now have allocations to at least one private asset class, while two in five (39%) have allocations to three or more.
Private equity maintains its position as the most popular, with almost two thirds of investors (63%) surveyed allocating to the asset class. Preqin added that “more capital is expected to flow into private equity in the next 12 months” despite a “more pessimistic returns outlook” over the short term.
The second most popular private asset class is set to be infrastructure, with 41% of respondents expecting to allocate more capital to the asset class over the next 12 months.
Then there’s private debt, which has outperformed investor expectations, with this trend “set to continue”. As a result, investors are intending to increase allocations to the asset class.
The main reason for this is that private debt provides more reliable income than other private market assets. And in times of uncertainty this is exactly what pension funds and other institutional investors are looking for.
Increasingly, they are also seeking investments with a positive ESG impact, particularly in relation to climate change. Fonds de Pensions Nestlé, the occupational pension scheme for the employees of Nestlé in Switzerland, recently said these types of investments are a “top priority”.
Lauren Mills, Private Markets Editor