Investors are seeking out private markets managers with renewed enthusiasm, if a new report by consultant bfinance is anything to go by.
In its “Manager intelligence and market trends” survey, the London-based firm found that private markets – including private equity, real estate, infrastructure and private debt – accounted for 43 percent of all manager searches mandated by clients for the 12 months to the end of March this year.
This was well above 24 percent for equity strategies and 17 percent for both fixed income and “diversifying strategies” such as hedge funds, liquid alternatives and multi-asset.
Moreover, the global spread of covid-19 only seems to have heightened interest in private markets. The report found that, in the first quarter of 2020, they were the focus of 52 percent of searches. This was against a background of an increased number of searches overall, with Q1 2020 accounting for 32 percent of all searches in the year to the end of March. The equivalent figure for Q1 2019 was 17 percent.
Bfinance said the results reflected clients both carrying out existing plans as well as seeking to position themselves for a new environment. “Private markets strategies are a logical beneficiary of current conditions, given the historically outstanding results of post-crisis vintages and the lower sensitivity to market timing: the date of the commitment does not determine the date of entry since – depending on the strategy – it can take months or years for money to be deployed,” the report said.
In a snap poll of 260 investors in 28 countries, which formed part of the report, most said they were broadly satisfied with their allocations to illiquid strategies in current conditions, having increased those allocations significantly in recent years – although performance was cited as a major “known unknown”. Thirteen percent of investors said they should have had more allocated to private markets.
The poll also found 10 percent of investors had made “significant changes to the portfolio” in the previous three weeks, with a further third making “minor dynamic/tactical adjustments”. A substantial minority – 27 percent – said they were struggling to rebalance portfolios because of current market conditions.