A quarter of global investors (26%) plan to increase the pace of private capital allocations to hedge against ongoing uncertainty, according to a new report.
Preqin’s ‘Investor Outlook: Alternative Assets, H2 2023’ revealed 63% of investors voted private equity the “most popular” category, while 41% expected to allocate more money to infrastructure – the “second-most popular” asset class – over the next 12 months.
Investors seeing opportunities in the US infrastructure market increased from 60% in last year’s survey to 70% in the current one, while investors identifying UK infrastructure as an attractive investment opportunity declined from 30% to 18%.
About 74% believe the denominator effect, where a portfolio segment’s decline forces institutions to sell assets for balance, didn’t cause a significant impact. Yet, those managing assets over $25 billion faced challenges due to moving substantial capital.
Private debt emerged as the asset class which has “most outperformed” investor expectations (90%). The survey found that 45% of investors plan to increase allocations in private debt over the next 12 months (45%), mainly driven by “reliable income”.
Cameron Joyce, SVP, head of private equity, research insights, Preqin, said: “As confidence starts to grow that we are approaching or have already hit the bottom of the market, investors look set to continue to deploy capital to private assets throughout Q3 and Q4. Equity markets tend to be a lead indicator of investor sentiment, so if optimism continues to grow, we could see greater activation of capital deployed over the coming years.”
In other findings, 81% of investors believe the real estate cycle is starting to decline, anticipating temporary challenges ahead. 60% of investors felt that hedge funds either met or exceeded their expectations in the past 12 months, with the US being voted the region offering the best investment opportunities across developed markets. Fewer investors are expected to increase their allocations to natural resources, with commodity price volatility as a key concern.
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