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.  


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