Public equities account for, on average, 42 per cent of asset owners’ portfolios, according to a new report by Northern Trust Corp.
The report, based on a survey of 180 global asset owners with investment portfolios ranging between US$1 billion and US$500 billion, found stocks were followed by fixed income (27 per cent) and private markets (13 per cent). For North American investors, equities represent nearly half (49 per cent) of their portfolios.
A majority (86 per cent) of respondents said they’re invested in private markets and 68 per cent said they have allocations to hedge funds, absolute return and other diversifiers. Indeed, the report found asset owners are prioritizing investment diversity with a healthy mix of public and private assets in their portfolios.
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The increased role of private assets is pushing investors to consider their liquidity and 60 per cent of respondents said liquidity management has become more important for them in the past year. The report also found cash allocations average between 11 per cent and 50 per cent for respondents that said liquidity is more important for them now.
When investors were asked for the reasons why liquidity management was crucial to their overall investment strategy, the current interest rate environment (75 per cent), higher returns (44 per cent) and change in risk strategy (43 per cent) were the leading factors.
Within the private market space, private equity (67 per cent) is the most popular asset class followed by commercial real estate (55 per cent), private credit and direct lending (49 per cent) and residential real estate (46 per cent).
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In the private market space, 66 per cent of investors favour a primarily active management style with cash investments (45 per cent) showing the highest proportion of passive management.
The report noted current allocations to cryptocurrencies and other digital assets remains low but shows a dramatic shift from a few years ago, when most asset owners had little to no exposure in cryptocurrencies.
“This rise in interest has been supported by the growth of digital infrastructure, as well as digital assets’ role in supporting the growth and development of private assets more broadly, as digitization can enable a greater degree of transparency and efficiency,” the report said.
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