Almost three-quarters (73 per cent) of global institutional investors expect Private Markets investments to outperform Public Markets over the next five years, according to the seventh Private Markets Study published by Aviva Investors.
The annual research, conducted in September and October 2024, captures responses from 500 institutional investors, including corporate DB and DC pension plans, public and government pensions, insurers and financial institutions in Europe, North America and Asia, which together represent combined assets of US$4.3 trillion.
Whilst ‘Diversification’ was highlighted by most respondents (70 per cent) as their main reason for allocating to Private Markets today, the ability of these assets to provide an illiquidity premium is expected to become an increasingly important characteristic.
47 per cent of investors expressed this as being a key reason for allocating to Private Markets assets in the next two years versus 40 per cent today.
The study also highlights institutional investors continuing to bolster their Private Markets portfolios, with 51 per cent expecting to increase allocations over the next 24 months. Of the three regions surveyed, European investors were most likely to be considering an increased allocation to Private Markets assets (57 per cent), compared to 47 per cent in North America and 44 per cent in Asia-Pacific.
David Hedalen, Head of Private Markets Research at Aviva Investors, said: “The illiquidity premium is emerging as a driving force behind the trend towards Private Markets, and investors are recognising it as a reason to increase their allocations to these strategies.
“Investors have had to adapt to changing market conditions over the last 12 months. Despite this, allocations to Private Markets have continued to trend upwards. It suggests a recognition of these asset classes to deliver across various stages of the investment cycle and offer diversification from public markets.”
Globally, Private Markets assets now account for 11.5 per cent of institutional investor portfolios, up from 10.5 per cent last year. Whilst allocations to Private Markets in North America were almost unchanged, the region remains the biggest investor in Private Markets globally by proportion, with 12.4 per cent of portfolios allocated to such strategies, compared to 11.5 per cent in Asia-Pacific and 11.1 per cent in Europe.
