Institutional investors are allocating to private markets in record numbers, according to recently published research.
The latest annual Private Markets Study conducted by UK-based Aviva Investors found that private markets made up 12.5% of overall portfolios globally.
In addition, almost half (49%) of respondents expect to increase exposure over the next two years while three-quarters (76%) anticipate private markets will outperform their public counterparts over the next five years.
Capital growth was identified as the main driver for the increased allocation from DC pension schemes into private markets with 55% planning to increase allocation and enhance access for members.
For public pension funds and insurers, co-investment was cited as the preferred approach for accessing private markets, as cited by 64% and 62% respectively.
The study also shows a sharp year-on-year increase in appetite for pooled funds and co-investment, with 58%of respondents favouring single-asset class pooled funds versus 40% last year and 54% stating co-investing is their preferred route to market compared to just 35% in 2024.
According to David Hedalen, head of private markets strategy and research at Aviva Investors, the increased appetite for co-investment opportunities among institutional investors is a “significant finding”.
Not only does it suggest demand for better access to larger opportunities, but it could also highlight the desire to have greater control of portfolios at an asset-specific level and capturing opportunities that allow an increasingly tailored approach to risk and return metrics, liability profiles, as well as other non-financial outcomes, such as regional preferences,” said Hedalen.
The study surveyed 500 global institutions from Europe, North America and Asia.
