Search for income to drive allocations to private assets, says BlackRock survey

Over 70% of investors in Europe intend to allocate more to private equity this year, the inaugural private-markets survey by fund manager BlackRock Alternatives indicated.

In private credit, more than half of respondents globally plan to add to their holdings in 2023, particularly real estate.

BlackRock Alternatives attempted to capture the views of capital allocators that control US$15 trillion in total assets under management – $3.2 trillion of which is allocated to private markets. The firm said this represented about a quarter of global institutional money invested in private markets.

Edwin Conway, global head of BlackRock Alternatives, said broad market declines last year and other negative factors were not derailing private markets growth, although the survey was carried out prior to the collapse of Silicon Valley Bank.

“The results of our inaugural Global Private Markets Survey show sophisticated investors have moved on from the 60/40 allocation model and that private assets will continue to grow as a percentage of global portfolios.”

Over 82% of investors chose income generation as the most important factor driving private markets investments. Capital appreciation was the next highest priority, at 58% of respondents. 

Just over 40% said they would select private markets for “better ESG demonstration”, and 42% cited risk diversification.

Appetite for private credit was increasing due to the search for income, particularly infrastructure and real estate debt. More than half of respondents globally planned to add to their private credit holdings. 

BlackRock Alternatives said some investors perceived a temporary dislocation in property values as a result of higher interest rates. Rising rent prices also meant residential real estate was popular among respondents, with 55% selecting multi-family and private rental residential properties as the biggest opportunity within the asset class. 

But private equity was in the highest demand, with more than 70% of investors globally intending to increase their allocations to the asset class this year. In Europe, Middle East and Africa, 71% planned to increase their private equity allocations. 

Over half of pension funds cited illiquidity as the single biggest barrier to investing in private assets. 

© 2023 funds europe 

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