The vast majority of investors plan to increase their private assets exposures over the next 12 months amid a growing focus on the benefits of diversification, Schroders Institutional Investor Study 2021 has found.
Schroders flagship annual institutional study, first launched in 2017 encompassing 750 investors and $26.8 trillion in assets spanning 26 locations, found that 90% of investors are aiming to increase their allocations in one or more private assets classes over the coming year.
The growing importance of private assets was further emphasised by 47% of investors stating they will continue to diversify into alternatives and private markets and reduce their listed exposures, driven by the economic and financial impact of the pandemic. This was almost double the proportion of investors polled last year.
Georg Wunderlin, Global Head of Private Assets, Schroders Capital, commented:
“Private assets continue to take a greater share of institutional portfolios. What is encouraging is the emergence of signs that the versatility within private markets is being recognised. However, while it is clear that institutional investors value real diversification highly, we think the variety and consistency of diversification within private assets may actually be underestimated.
“The opportunity is not only to diversify across publicly listed and private investments, but also to diversify within private assets. By combining different private asset classes investors can get exposure to very different return, risk and liquidity profiles and also make use of different underlying macroeconomic and industry-specific return drivers.
“Private markets are incredibly nuanced. They offer not only a wider range of risks, such as complexity- or illiquidity-based premia than many investors realise, but a huge number of private assets focused investment solutions can be tailored depending on investors’ preferences. A growing number of our clients are taking advantage of this potential as we remain focused on working in partnership with them to meet their evolving needs amid the ongoing challenges of the pandemic and broader market uncertainties.”