Nearly a third (32 per cent) of U.S. institutional investors say they plan to increase their private asset allocations over the next two years, primarily due to diversification benefits, lower volatility and the potential to garner higher returns than public markets, according to a new survey by Schroders.
The survey, which polled more than 100 institutional investors, found 42 per cent said they plan to increase their allocations to infrastructure over the next 12 months.
In terms of key investment themes for allocating private assets, half (49 per cent) of respondents cited the technological revolution while 39 per cent cited the energy transition.
Despite ongoing conflicts about the role of environmental, social and governance factors in portfolios, U.S. institutional investors continue to see value. The survey found three-quarters (74 per cent) said they believe sustainable investments are required to achieve long-term financial goals and two-thirds (66 per cent) said they’re motivated to diversify into new sectors.
About a quarter (23 per cent) of institutional investors said actively engaging with portfolio companies and borrowers to ensure impact targets are achieved is the best way to ensure positive and measurable impact in private assets investing. However, nearly two-thirds (63 per cent) cited the limited track record of both financial and sustainability performance of funds and mandates as an obstacle, followed by weak sustainability and impact measurement practices of asset managers and investee companies (51 per cent).
“Amid continued volatility and geopolitical uncertainty, investors are looking for opportunities for diversification and returns that align with trends shaping global markets,” said Nick Thompson, head of private asset sales for North America at Schroders, in a press release. “Private assets investing can allow them access to companies and industries at the forefront of major developments, such as the energy transition and technological innovation. Asset classes like private equity and infrastructure investing can offer both high returns and sustainable opportunities.”