The growing popularity of alternatives creates increased demand for private assets. Despite overcrowding concerns, institutional investors remain overwhelmingly bullish, with one surprising category above all.
More than half (60%) of institutional investors maintain a bullish outlook for private equity this year. That’s according to a survey from Natixis Investment Managers that included 500 institutional investors spanning 27 countries.
A shift in core portfolio allocations to increase alternative exposures and reduce bonds alongside the perception of better return potential over stocks keeps institutional investors optimistic in the space. Over half of institutional investors (65%) surveyed believe a 60/20/20 portfolio comprised of equities, bonds, and alternatives will offer better performance over a traditional 60/40 portfolio this year. And for institutional investors, 83% of their alternatives are made up of private assets.
The Surprise Investment Winner Within 2024 Private Assets
The biggest winner and area of opportunity within private assets in 2024 comes from a less talked about arena: sustainable investing.
“In fact, 35% of institutions say sustainable investments present the biggest opportunity in private markets for 2024,” the report authors wrote.
87% of institutions currently invested in green bonds plan to either maintain or increase those investments this year. Almost all institutions (96%) currently holding ESG allocations plan to either maintain or grow those investments this year.
Over half (52%) of fund selectors for wealth management platforms reported growing demand for sustainable investments by clients. As such, these selectors (36%) intend to increase sustainable offerings on their platforms this year. It snowballs onto the 44% who added sustainable investments last year.
Strong government support and funding for the energy transition benefit sustainable investing. Additionally, the nature of private asset management makes ESG and sustainable investing more appealing than on the public side.
“Another reason may be the ability to influence how assets are managed with private investments,” explained the authors. This “is a significant positive for investors looking to make a tangible impact.”
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