Private equity to remain most in-demand alternative asset class for institutional investors

Written by Adam Cadle

06/02/2023

Private equity is expected to remain the most in-demand alternative asset class among institutional investors over the next two to three years, survey results published by State Street Corporation have shown.

The survey gathered views from 480 institutional investors across North America, Latin America, Europe and Asia-Pacific. Sixty-eight per cent of the respondents plan to continue their allocation to private markets in line with current targets, despite acknowledging that rising interest rates reduce the attractiveness of the highly leveraged asset class. Sixty-three per cent said private equity would be their largest allocation.

Private credit is the asset class investors are least likely to make their largest allocations to (43%), with real estate and infrastructure both at 48%. Respondents made it clear they were going to be more focused on deal quality in the future with many making changes to their due diligence processes (47%) or narrowing the universe of investments they will consider through higher baseline standards (42%).

"The tailwinds of the last decade may be gone, but it is clear that private markets remain extremely attractive," said Paul Fleming, head of the global alternatives segment for State Street. "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. Dry powder will become invaluable in the next couple of years."

Related Articles