Income Generation to Drive Global Private Asset Allocation this Year, BlackRock Alternatives Survey Finds

• More than 70% of respondents globally intend to increase their allocations to private equity this year
• In private credit, more than half of respondents globally plan to add to their holdings in 2023
• Sourcing is the top priority for investors when selecting a private markets manager

BlackRock Alternatives today released the results of its inaugural Global Private Markets Survey, the first survey it conducted to capture the views of capital allocators representing US$15 trillion in total assets under management – with US$3.2 trillion invested in private markets. This represents approximately a quarter of the global private market’s institutional investment landscape.

Edwin Conway, Global Head of BlackRock Alternatives, said, “Over the past 20 years, we have seen private markets grow from a niche category to the cornerstone of many portfolios. 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.”

Income generation key

Income generation emerges as the most important factor driving private markets investments, with 82% of respondents identifying it as the key factor in their allocation considerations. Capital appreciation is the next highest priority driving the decision to allocate to private markets, according to 58% of respondents.

Appetite for private credit increasing

The search for income has translated into significant investor interest in private credit, particularly infrastructure and real estate debt, as well as distressed strategies. More than half of respondents globally plan to add to their private credit holdings. In the U.S. and Canada, more than a third of investors expect to “substantially increase” their private credit allocation in 2023.

Private equity in highest demand

Globally, more than 70% of investors intend to increase their allocations to private equity this year, though it remains to be seen if recent upheavals have changed that outlook. More than half of all investors based in the U.S. and Canada plan to increase their allocations across asset classes this year, while in the Asia-Pacific region more than two-thirds of respondents plan to add to their private credit allocations. In EMEA, 71% plan to increase their private equity allocations.

Opportunities within asset classes

As investors increase their private markets allocations, they can choose from a wide selection of assets with different characteristics. For example, in private equity, more than half of respondents in each region believe mature companies are the most attractive opportunity for returns, followed by venture capital, secondaries and buyouts, respectively. Looking at private credit, capital allocators see the biggest opportunities in infrastructure or real estate debt, driven by expected tailwinds from recent U.S. infrastructure legislation and what some see as a temporary dislocation in property values as a result of higher interest rates. Distressed strategies are a close second.

In infrastructure, respondents identify emerging markets as the greatest opportunity, with transportation and renewables closely following.

Barriers remain

While private markets continue to expand, and investors plan to allocate more, there are still factors hindering further investments. Though respondents shared their views prior to the recent bank failures, the survey reveals that they see liquidity as the single biggest barrier to investing in private assets. Respondents differ in just how big an issue they see liquidity being, with more than half of all pensions naming illiquidity as their main obstacle to private markets, while only 40% of insurers agree. After liquidity, barriers to private markets include getting internal stakeholder buy-in and limited organizational expertise or comfort levels with the asset class, respectively.

Asset Allocation Insights:

• Respondents’ average portfolio allocation to private markets is 24%
• 72% of respondents worldwide plan to increase their private equity allocations
• More than half of respondents plan to add to their private credit holdings
• In private credit, infrastructure and real estate debt, as well as distressed strategies, are seen as the biggest opportunities
• More than half of all U.S. and Canada investors plan to increase allocations to each asset class this year
• More than 70% of EMEA investors plan to increase allocations to private equity
• More than two-thirds of respondents in Asia-Pacific plan to add to their private credit allocations
• Income generation is the top reason for investors allocating to private markets, with capital appreciation ranked in second place

Notes for Editors

• BlackRock Alternatives surveyed senior executives and allocators at more than 200 institutions in 22 countries, managing US$15 trillion in assets, with $3.2 trillion invested in private markets. This represents an estimated 25% of the entire global private markets institutional investment landscape.
• Respondents included public pensions, corporate pensions, insurers, family offices, foundations and endowments, and sovereign wealth funds.
• The survey was undertaken from October 2022 through January 2023.

About BlackRock Alternatives

BlackRock Alternatives serves investors seeking outperformance in infrastructure, private equity, credit, real estate, hedge funds and multi-alternatives. We strive to bring our investors the highest quality investments by drawing upon our global footprint, superior execution capabilities and position as a preferred partner. BlackRock manages $320 billion in alternative investments and commitments on behalf of clients worldwide as of March 31, 2023.

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