Nearly three-quarters of institutional investors plan to increase their allocation to private equity in 2023, according to a new survey from BlackRock Alternatives.
In its inaugural survey of senior executives at global institutions representing a total of $15 trillion in assets, BlackRock Alternatives found 72% of respondents said they plan to increase their allocation to private equity.
Also, 52% of respondents intend to increase their allocations to multialternative solutions and private credit and 51% plan to increase their allocation to real estate.
Investors in the U.S. and Canada were particularly enthusiastic about private credit, with more than a third saying they plan to "substantially increase" their investments in private credit. Within that asset class, 51% see infrastructure or real estate debt as one of the biggest opportunities within private credit, while 50% said distressed strategies, 48% said European direct lending, 43% said opportunistic credit, 42% said venture debt and 40% said U.S. direct lending. Multiple responses were accepted.
Within infrastructure, the highest level of enthusiasm was for emerging markets, with 51% of respondents saying it was one of the biggest opportunities, 47% said transportation infrastructure, 37% said renewables and 32% said digital infrastructure.
Within private equity, the highest level of enthusiasm was for mature companies, with 56% highlighting it as a big opportunity, followed by venture capital at 40%, secondaries at 39% and buyouts at 34%.
The survey quoted an unnamed U.S. corporate pension fund portfolio manager who specializes in alternatives.
"I think people are cautious right now, so mature companies make sense, though I am a little surprised to see venture capital so high, but given the uncertainty we're living with and the higher cost of capital, venture could be seen as a risky but attractive opportunity if you have the right manager and the right fund," he said.
Overall, respondents allocate an average of 24% to private markets, according to the survey.
When asked what the most important factors are in driving their private markets investments, 82% of respondents said income generation, while 58% said capital appreciation, 43% said better ESG demonstration, 42% said risk diversification and 16% said less volatility. Multiple answers were accepted.
"Over the past 20 years, we have seen private markets grow from a niche category to the cornerstone of many portfolios," said Edwin N. Conway, senior managing director and global head of BlackRock Alternatives, in a news release Tuesday. "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. Despite broad market declines last year, recession concerns and recent market turmoil, we see that short-term uncertainty is not derailing the growth of private markets."
Responses were received from October through January.
