Perspective

Allocating to private assets with your fiduciary manager


In this piece, we discuss why schemes should consider including private assets in their investment strategies, how to consider adding exposure based on their illiquidity tolerance, and some practical implementation considerations that a fiduciary manager can help trustees overcome while building out the exposure.

Why consider private assets?

UK DB schemes have been long-term investors in private assets, with real estate historically being the main component. In the late 1990s to mid-2000s, schemes invested more substantially into private equity to enhance returns, particularly through a fund of funds approach to ensure diversification across managers and vintages, while the years following the global financial crisis saw schemes seeking greater exposure to ‘core’ assets that provided diversification, such as infrastructure. Fast forward to mid to late 2010s and appetite rose in investing, across both the short and long-duration end of the spectrum as a result of de-risking and the need for higher spreads owing to the low interest rate environment.

Through their history, private assets have delivered on their promise to generate high returns to compensate investors for taking on illiquidity and they have done so while dampening total portfolio risks given their diversifying characteristics. As all types of asset owners seek to capture these benefits, private assets AUM have grown from $2.6 trillion in 2010 to $7.4 trillion at the end of 20201.

1 Preqin AUM data, accessed as of 25 March 2021. Mckinsey – A Year of disruption in private markets, 2021. Asset classes include private equity, real estate, infrastructure, and private debt as classified by Preqin.  

 

The full and in-depth report is linked below.

 

Important Information

Marketing material for professional clients only. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. The views and opinions contained herein are those of the individuals to whom they are attributed and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This information is not an offer, solicitation or recommendation to buy or sell any financial instrument or to adopt any investment strategy. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Nothing in this material should be construed as advice or a recommendation to buy or sell. Reliance should not be placed on any views or information in the material when taking individual investment and/or strategic decisions. Insofar as liability under relevant laws cannot be excluded, no Schroders entity accepts any liability for any error or omission in this material or for any resulting loss or damage (whether direct, indirect, consequential or otherwise). Schroders will be a data controller in respect of your personal data. For information on how Schroders might process your personal data, please view our Privacy Policy available at www.schroders.com/en/privacy-policy or on request should you not have access to this webpage. For your security, communications may be recorded or monitored. Issued in May 2021 by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered in England, No. 1893220. Authorised and regulated by the Financial Conduct Authority. UK002625. 601067.