More than 70% of investors intend to increase their allocations to private equity this year, though it remains to be seen if recent upheavals have changed that outlook, according to BlackRock Alternatives’ inaugural Global Private Markets Survey.
More than 70% of investors intend to increase their allocations to private equity this year, though it remains to be seen if recent upheavals have changed that outlook, according to BlackRock Alternatives’ inaugural Global Private Markets Survey.
The survey, which captures the views of capital allocators representing $3.2 trillion invested in private markets – approximately a quarter of the global private market’s institutional investment landscape – also reveals that more than half of all investors based in the US and Canada plan to increase their allocations across asset classes this year. In the Asia-Pacific region, meanwhile, more than two-thirds of respondents plan to add to their private credit allocations. In EMEA, 71% plan to increase their private equity allocations.
Income generation emerges as the most important factor driving private markets investments, with 82% of respondents identifying it as the key factor in their allocation considerations. Capital appreciation is the next highest priority driving the decision to allocate to private markets, according to 58% of respondents.
The search for income has translated into significant investor interest in private credit, particularly infrastructure and real estate debt, as well as distressed strategies. More than half of respondents globally plan to add to their private credit holdings. In the US and Canada, more than a third of investors expect to “substantially increase” their private credit allocation in 2023.
According to the survey, as investors increase their private markets allocations, they can choose from a wide selection of assets with different characteristics. For example, in private equity, more than half of respondents in each region believe mature companies are the most attractive opportunity for returns, followed by venture capital, secondaries and buyouts, respectively. Looking at private credit, the survey reveals that capital allocators see the biggest opportunities in infrastructure or real estate debt, driven by expected tailwinds from recent US infrastructure legislation and what some see as a temporary dislocation in property values as a result of higher interest rates. Distressed strategies are a close second.
In infrastructure, respondents identify emerging markets as the greatest opportunity, with transportation and renewables closely following.
While private markets continue to expand, and investors plan to allocate more, there are still factors hindering further investments. Though respondents shared their views prior to the recent bank failures, the survey reveals that they see liquidity as the single biggest barrier to investing in private assets. Respondents differ in just how big an issue they see liquidity being, with more than half of all pensions naming illiquidity as their main obstacle to private markets, while only 40% of insurers agree. After liquidity, barriers to private markets include getting internal stakeholder buy-in and limited organisational expertise or comfort levels with the asset class, respectively.
