The demand for private markets investments by asset owners and managers is expected to rise in the next three to five years as investors seek higher yields and greater diversification, according to a recent survey State Street conducted with 170 private market asset managers and asset owners.
According to the survey results, asset managers expect that their median allocation to private market assets will rise from 30 per cent to 35 per cent, while asset owners believe it will increase from 22 per cent to 28 per cent.
Respondents identified the most significant drivers of this momentum to be diversification from listed markets (59 per cent of asset managers and 67 per cent of asset owners) and better opportunities for return generation (52 per cent of asset managers and 52 per cent of asset owners). Forty-per cent of asset managers also identify private markets as an attractive and/or stable source of yield.
However, there are significant barriers to investing in private markets. 64 per cent of respondents are concerned about weak standards of accounting and audit controls, 60 per cent about high management fees relative to public markets and 58 per cent about lack of uniform data standards. To maximize the next stage of growth in private markets and meet rising investor expectations, asset managers will have to improve their data management and reporting processes and adopt more sophisticated technologies.
