In focus

Can you successfully combine private and public in multi-asset?


The arguments for expanding an investment portfolio into private assets are well known. It can improve diversification. It can allow access to potentially high returning opportunities. It can even offer an additional skill or ‘complexity premium’ from the most skilled managers (particularly for those with a superior deal sourcing network).

Combining public and private assets into a single external multi-asset portfolio is gathering momentum amongst institutional investors, particularly for those who haven’t invested in private assets yet. Even so, the liquidity challenges of private assets are still there. Here, we lay out the benefits of combined public-private portfolios, and weigh them against the risks.

Rising, accelerating interest

Quantifying asset flows into blended public-private investment mandates is difficult. There is, however, clear evidence to demonstrate rising interest among institutions and insurance companies.

Our 2021 Global Institutional Investor Survey, incorporating the views of 750 institutional respondents, confirmed this growing appetite with 47% of investors looking to diversify into alternatives and private markets, up from just 26% in 2020.

Furthermore, 42% of investors are increasing their use of private assets to ‘manage risk within the portfolio’, with asset class diversification the single most important strategy for risk management.

The largest institutions continue to want to add to their private assets, as has been a trend for over a decade. However, some that haven’t done it yet are looking to offer single mandates to skilled managers who can manage both public and private in one portfolio.

What are the advantages of combining public and private assets into one portfolio?

In our experience there are four key reasons for asking a portfolio manager to manage a combined portfolio across multiple asset classes:

  • Single point of governance;
  • Improved management of committed cash and disbursements;
  • Management of the public portion of the portfolio while cognisant of the private portion;
  • Consistent measurement of overall portfolio risk, sustainability profile and impact.

Read the full report

Can you successfully combine private and public in multi-asset?

Download

Important Information
The contents of this document may not be reproduced or distributed in any manner without prior permission.
This document is intended to be for information purposes only and it is not intended as promotional material in any respect nor is it to be construed as any solicitation and offering to buy or sell any investment products. The views and opinions contained herein are those of the author(s), and do not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. The material is not intended to provide, and should not be relied on for investment advice or recommendation. Any security(ies) mentioned above is for illustrative purpose only, not a recommendation to invest or divest. Opinions stated are valid as of the date of this document and are subject to change without notice. Information herein and information from third party are believed to be reliable, but Schroder Investment Management (Hong Kong) Limited does not warrant its completeness or accuracy.
Investment involves risks. Past performance and any forecasts are not necessarily a guide to future or likely performance. You should remember that the value of investments can go down as well as up and is not guaranteed. You may not get back the full amount invested. Derivatives carry a high degree of risk. Exchange rate changes may cause the value of the overseas investments to rise or fall. If investment returns are not denominated in HKD/USD, US/HK dollar-based investors are exposed to exchange rate fluctuations. Please refer to the relevant offering document including the risk factors for further details.
This material has not been reviewed by the SFC. Issued by Schroder Investment Management (Hong Kong) Limited.