Institutional investors still favour private market allocations despite the tough economic environment, with some of them expecting discounts on assets, a State Street survey shows.
The survey of 480 institutional investors revealed 68% of respondents plan to continue their allocation to private markets in line with current targets.
Private equity remains the most attractive asset class to investors, with 63% of institutional investors expecting to make private equity their largest allocation in the next two to three years. Only 43% of investors are likely to make private credit their largest allocation, making it the least attractive asset class.
Real estate and infrastructure also remain less favoured by investors, with only 48% choosing either asset class as their largest allocation.
The survey respondents indicated they will become more focused on deal quality in the future, and to achieve this nearly half of them said they were making changes to their due diligence processes.
Also, 42% said they will implement higher baseline standards to narrow the universe of investments they will consider.
Paul Fleming, head of the global alternatives segment at State Street, said: “Our survey finds that three-quarters of respondents believe tougher economic conditions will create discounted opportunities, but investors are likely to bide their time, as at least half feel valuations have not yet fully adjusted.”
He added: “Dry powder will become invaluable in the next couple of years.”
© 2023 funds europe
