Institutional investors are shifting towards private markets, with 66% planning to increase their allocations over the next five years, according to investment manager Nuveen’s survey.
The survey, which gathered insights from 800 institutions managing $19 trillion in assets, highlighted a growing appetite for alternative investments, infrastructure and impact-driven strategies.
Real estate and infrastructure are regaining traction, with private infrastructure and private real estate seeing the largest year-over-year increases in investor interest. The percentage of investors planning to increase allocations rose from 35% to 50% for private infrastructure and from 24% to 37% for private real estate.
Within these sectors, investors are targeting digital infrastructure, with 65% increasing allocations to data centres, driven by the expansion of cloud computing and AI demand. Additionally, over 30% of investors increasing private fixed income allocations are focusing on energy infrastructure credit.
“Aligned with what we’re hearing from clients on a day-to-day basis, three main themes emerged from the survey this year,” said Harriet Steel, global head of institutional at Nuveen. “First, investors are considering ways to play the next real estate cycle; second, private markets will play an expanded role in portfolio construction, with nearly 40% of investors seeking out a broader selection of asset managers; and third, insurers are demonstrating a greater appetite for complexity and specialization, alongside a stronger focus on impact investing.”
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Regional trends are also emerging, with 46% of insurers in Europe, the Middle East and Africa planning to increase private real estate allocations, compared to 27% last year. Interest is especially strong in Germany, where 51% of investors plan to boost private real estate exposure, more than doubling from 24% in 2024.
Over 90% of investors now hold both private equity and private credit, up from 45% in 2021. “Private market flows remain resilient, with funding sourced from public asset outflows, cash reserves and new capital,” Steel said. “Even those adjusting allocations within private markets are largely reallocating rather than exiting.” The trend is also extending into higher-yield, higher-risk private credit, with nearly half of investors exploring niche opportunities such as energy infrastructure credit and fund finance.
According to the survey, 40% of institutions are expanding their roster of asset managers to handle increasing specialisation and complexity.
Insurance companies are showing a strategic shift toward private markets and impact investing, with 69% planning to increase allocations over the next five years. Private real estate debt (45%) and energy infrastructure credit (46%) emerged as focus areas, alongside interest in private asset-backed securities (34%) and fund finance (26%).
93% of insurers are now integrating or planning to integrate ESG factors into their portfolios. The number of insurers managing a dedicated impact investment sleeve has grown from 26% to 55% , as recorded in last year’s survey. “Insurers are demonstrating an increasingly confident and sophisticated approach to portfolio construction, balancing long term private market exposure with a commitment to impact-driven investing,” Steel added.
73% of investors agreed that near-term energy needs require a mix of traditional and renewable sources. While fewer investors now see the low-carbon transition as inevitable (61% vs. 79% in 2022), commitment to clean energy and carbon reduction remains strong. 44% of institutions already have net-zero commitments and another 25% plan to set targets in the next year.
Nature-based investing is still in its early stages, with only three in 10 investors increasing focus on biodiversity and ecosystem themes. However, among those prioritising these strategies, 79% are targeting water management, pollution reduction and recycling investments.
