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Institutional Investor Study 2019

Geopolitics and investor expectations

Schroders’ third annual Institutional Investor Study analyses the investment perspectives of 650 institutional investors, collectively responsible for $25.4 trillion in assets and from 20 locations across the world.

The Study provides a snapshot of some of the world’s largest investors’ key areas of focus and concern including the macroeconomic and geopolitical climate, return expectations, asset allocation and attitudes to private assets and sustainable investing.

There is a continued growing demand for private assets globally, with 52% of institutional investors expecting to increase allocations to private assets over the next five years

North America
58% 32% 10%
Latin America
42% 27% 30%
Europe
49% 35% 15%
Asia-Pacific
50% 36% 14%

Global

  • Increase
  • Remain the same
  • Decrease

Institutional investors point to higher returns and the benefits of diversification as the key reasons for investing in private assets

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To generate high returns

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To diversify your portfolio

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To better manage risk

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To generate a steady income

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To hedge against inflation

  • Global
  • North America
  • Europe
  • Latin America
  • Asia-Pacific

Institutional investors currently allocate the largest proportion of their private assets portfolio to real estate, followed by private equity

Current allocation of private assets

Real estate
Up to 5%: 70%
6-10%: 19%
> 10%: 10%
Private equity
Up to 5%: 79%
6-10%: 13%
> 10%: 8%
Private debt (corporate)
Up to 5%: 76%
6-10%: 19%
> 10%: 5%
Real estate debt
Up to 5%: 82%
6-10%: 13%
> 10%: 5%
Infrastructure equity
Up to 5%: 86%
6-10%: 10%
> 10%: 4%
Infrastructure debt
Up to 5%: 90%
6-10%: 6%
> 10%: 4%
Insurance Linked Securities
Up to 5%: 92%
6-10%: 5%
> 10%: 3%
  • Up to 5%
  • 6-10%
  • Greater than 10%

Return expectations over the next 12 months

Real estate
Up to 5%: 35%
6-10%: 57%
> 10%: 8%
Private equity
Up to 5%: 17%
6-10%: 69%
> 10%: 14%
Private debt (corporate)
Up to 5%: 37%
6-10%: 47%
> 10%: 15%
Real estate debt
Up to 5%: 46%
6-10%: 32%
> 10%: 23%
Infrastructure equity
Up to 5%: 18%
6-10%: 62%
> 10%: 19%
Infrastructure debt
Up to 5%: 43%
6-10%: 31%
> 10%: 25%
Insurance Linked Securities
Up to 5%: 46%
6-10%: 21%
> 10%: 33%
  • Up to 5%
  • 6-10%
  • Greater than 10%

Private equity, real estate and infrastructure equity are expected to be the top return generators over the next 12 months

Yet there are still hurdles when investing in private assets. Fees, liquidity and complexity are stated as being especially challenging

  • Global
  • North America
  • Europe
  • Latin America
  • Asia-Pacific

Fees

Liquidity

Complexity

Lack of internal investment skills/resources

Governmental/regulatory barriers

High valuations are the primary concern when investing in private assets, reflecting fears the market could be overheating

69%

High valuations

69%

Lack of transparency

69%

Higher fees

69%

Concentration of capital flows into largest funds causing overheating risk

69%

Defaults / investment failure

69%

Concerns about levels of dry powder in the market

69%

Complexity of the market

Schroders commissioned CoreData to conduct the third Institutional Investor Study to analyse the world’s largest investors’ key areas of focus and concern including the macroeconomic and geopolitical climate, return expectations, asset allocation and attitudes to private assets and sustainable investing. The respondent pool represents a spectrum of institutions, including pension funds, insurance companies, sovereign wealth funds, endowments and foundations managing approximately $25.4 trillion in assets. The research was carried out in May 2019. The 650 institutional respondents were split as follows: 175 in North America, 250 in Europe, 175 in Asia-Pacific and 50 in Latin America. Respondents were sourced from 20 different locations.

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