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State Street (NYSE: STT) conducted a survey revealing that private market assets are seeing increasing demand, with over a third of institutions already allocating more than 50% of their portfolios to private markets. The vast majority of institutional investors are expecting growth in their exposure to private market assets over the next couple of years, particularly in infrastructure, private debt, and, longer-term, private equity. However, economic conditions pose continued challenges, with macro issues impacting fundraising and borrowing costs for private markets. Technology and legislation are expected to play pivotal roles in driving growth in retail investor participation in private markets.
State Street (NYSE: STT) ha condotto un sondaggio che rivela una crescente domanda di asset di mercati privati, con oltre un terzo delle istituzioni che già allocano più del 50% dei loro portafogli ai mercati privati. La grande maggioranza degli investitori istituzionali prevede un aumento della loro esposizione agli asset dei mercati privati nei prossimi anni, in particolare nelle infrastrutture, nel debito privato e, a lungo termine, nel capitale privato. Tuttavia, le condizioni economiche continuano a rappresentare una sfida, con problemi macroeconomici che influenzano la raccolta fondi e i costi di prestito per i mercati privati. Si prevede che tecnologia e legislazione giocheranno ruoli cruciali nel promuovere la crescita della partecipazione degli investitori al dettaglio nei mercati privati.
State Street (NYSE: STT) realizó una encuesta revelando que los activos del mercado privado están experimentando una demanda creciente, con más de un tercio de las instituciones asignando ya más del 50% de sus carteras a mercados privados. La vasta mayoría de los inversores institucionales esperan un crecimiento en su exposición a activos del mercado privado en los próximos años, especialmente en infraestructura, deuda privada y, a más largo plazo, en capital privado. Sin embargo, las condiciones económicas plantean desafíos continuos, con problemas macroeconómicos que impactan la recaudación de fondos y los costes de préstamo para los mercados privados. Se espera que la tecnología y la legislación desempeñen roles clave en impulsar el crecimiento de la participación de inversores minoristas en los mercados privados.
스테이트 스트리트(NYSE: STT)가 실시한 설문조사에 따르면, 사적 시장 자산에 대한 수요가 증가하고 있으며, 기관의 3분의 1 이상이 이미 포트폴리오의 50% 이상을 사적 시장에 할당하고 있습니다. 대다수의 기관 투자자들은 향후 몇 년간 인프라, 사적 채무, 그리고 장기적으로는 사적 자본에 대한 노출이 증가할 것으로 기대하고 있습니다. 그러나 경제적 조건은 지속적인 도전을 제기하며, 매크로 문제가 사적 시장을 위한 자금 모금과 차입비용에 영향을 미치고 있습니다. 기술과 법률은 사적 시장에서 소매 투자자 참여 증대를 촉진하는 데 결정적인 역할을 할 것으로 예상됩니다.
State Street (NYSE: STT) a mené une enquête révélant que les actifs des marchés privés connaissent une demande croissante, avec plus d'un tiers des institutions allouant déjà plus de 50% de leurs portefeuilles aux marchés privés. La grande majorité des investisseurs institutionnels s'attendent à une croissance de leur exposition aux actifs des marchés privés dans les années à venir, notamment dans les infrastructures, la dette privée et, à plus long terme, dans le capital-investissement privé. Cependant, les conditions économiques continuent de poser des défis, avec des problèmes macroéconomiques impactant la collecte de fonds et les coûts d'emprunt pour les marchés privés. La technologie et la législation devraient jouer des rôles pivots pour stimuler la croissance de la participation des investisseurs de détail dans les marchés privés.
State Street (NYSE: STT) hat eine Umfrage durchgeführt, die zeigt, dass private Marktassets eine steigende Nachfrage verzeichnen, wobei bereits über ein Drittel der Institutionen mehr als 50% ihrer Portfolios in private Märkte investieren. Die überwiegende Mehrheit der institutionellen Anleger rechnet in den nächsten Jahren mit einem Wachstum ihrer Beteiligungen an privaten Marktassets, insbesondere in Infrastrukturen, privaten Schulden und auf längere Sicht in Privatkapital. Wirtschaftliche Bedingungen stellen jedoch weiterhin Herausforderungen dar, wobei makroökonomische Probleme die Mittelbeschaffung und die Kreditkosten für private Märkte beeinflussen. Technologie und Gesetzgebung werden voraussichtlich eine entscheidende Rolle spielen, um das Wachstum der Beteiligung von Privatinvestoren an privaten Märkten zu fördern.
Positive
Increasing Demand: Institutional investors are increasing their allocation to private market assets, specifically in infrastructure and private debt. A significant number of respondents expect to allocate more than 50% of their portfolios to private markets in the coming years.
Challenging Economic Conditions: Participants in the survey indicate that challenging economic conditions, such as inflation and macro issues, are making fundraising more difficult and impacting borrowing costs for private markets.
Technological Innovation: The survey indicates that AI technology and machine learning have the potential to significantly enhance private market operations, driving institutional investors' private markets outlook.
Institutional Skepticism: Institutions remain skeptical about prospects for increased retail investment in private markets, although they see potential for legislation to drive increased retail participation.
Negative
Impact on Fundraising: Respondents note that macro challenges are making fundraising difficult, leading to delays of three months to a year or more, which negatively affects investors.
Supply and Demand Balance: Investors are experiencing a tightening supply of quality deals, and the lack of quality data is an impediment to assessing and viewing public and private assets data in one place.
Cost of Borrowing: Participants claim that borrowing costs continue to be an issue for institutions, potentially affecting their investment behaviors and opportunities in the future.
Infrastructure and private debt remain the top private market asset classes over the next 1-2 years; roughly half of respondents see “strong demand” for private market assets among retail and DC investors
BOSTON--(BUSINESS WIRE)--
State Street Corporation (NYSE: STT) today released the results of its third annual private markets survey1, which explores the allocations of 480 institutional investors including traditional asset managers, private market managers, insurance companies, and asset owners across North America, Latin America, Europe, and Asia-Pacific.
The survey reveals that the rotation from public to private assets within portfolio allocations will grow further in the coming years. Over a third of institutions (36%) have already allocated more than 50% of their portfolio to private markets, and this is set to grow to 41% of institutions doing so over the next three to five years. Over half of institutions (59%) have already allocated 30% or more to private markets, and this is expected to grow to 71% by 2028.
Infrastructure and private debt are the most attractive asset classes, with 71% of institutional investors expecting to increase allocation to each over the next one to two years. However, longer term private equity is set to return to favor, with almost three quarters (73%) of investors planning to increase allocations to the asset over the next three to five years. Investors intend to decrease allocation in public markets to meet increased demand for private exposure.
“The great rotation from public to private markets is not slowing down, with investors set to allocate more to private assets than ever before,” said Donna Milrod, executive vice president and chief product officer at State Street. “This increasingly sophisticated private market universe means the current economic environment, coupled with investors’ desire for wider, more diverse avenues of capital, is making private markets attractive now and for the foreseeable future.”
In the near term, challenging economic conditions will remain
The majority of respondents (61%) believe that inflation has peaked in their local markets, but most do not believe it will fall back within their local central banks’ target range over the next two years. Most respondents (58%) are finding that macro challenges are making fundraising difficult, which is leading to delays of three months to a year or more. In response, institutions are increasing their diversification, investment in risk management, and reducing risk exposure with 43% exploring fresh market niches, 38% enhancing risk management processes, and 34% reducing risk to protect against downside.
“Overall, while demand for private market assets continues to grow, investors are also experiencing a tightening supply of quality deals and express that borrowing costs can be an issue for them,” said Scott Carpenter, global head of Private Markets & Credit at State Street. “Central bank decisions on rates and the state of inflation will heavily influence opportunities and investing behaviors over the next couple of years.”
AI-enabled technological innovation is core to institutional investors’ private markets outlook
Risk measurement and management, liquidity management, and the ability to forecast future and capital pacing are among the top operational challenges institutions face when investing in private markets. Almost 80% of investors are looking for a centralized, accessible platform for public and private asset data, as the current lack of availability, accuracy, and timeliness of data is an overlooked aspect of private markets.
However, the recent advancements in AI have the potential to improve private markets operations significantly. Nearly half of respondents (43%) globally believe that machine learning has the potential to enhance private markets operations, while more than half (58%) believe that generative AI will enhance operations.
“AI excitement from institutional investors is driven by the industry’s historic deficiencies in quality private market data,” added Milrod. “Subpar access to quality data is a major impediment that stands in the way of a firm’s ability to view and assess public and private assets data in one place. As we speak with clients, it is clear AI has the potential to hugely improve this aspect of the market.”
Improvements through legislation key to driving increased retail participation
Institutions surveyed remain skeptical about prospects for increased retail investment in private markets, but see potential for legislation to open options and drive flows. More than half of respondents (54%) believe current investment products do not make the asset classes suitable for retail investors, while around half (49%) believe there is strong demand for access to private markets among retail or DC investors.
Please click here for the full report: 2024 Private Markets Outlook: From headwinds to tailwinds.
1The study, commissioned by State Street and conducted by CoreData Research, surveyed 480 respondents from traditional asset managers, private market managers, insurance companies and asset owners across four regions, North America, Latin America, Europe and Asia Pacific in September to November 2023.
About State Street Corporation
State Street Corporation (NYSE: STT) is one of the world's leading providers of financial services to institutional investors including investment servicing, investment management and investment research and trading. With $43.9 trillion in assets under custody and/or administration and $4.3 trillion* in assets under management as of March 31, 2024, State Street operates globally in more than 100 geographic markets and employs approximately 46,000 worldwide. For more information, visit State Street's website at www.statestreet.com.
* Assets under management as of March 31, 2024 includes approximately $66 billion of assets with respect to SPDR® products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated.
What were the top private market asset classes in the survey?
The top private market asset classes mentioned in the survey were infrastructure and private debt.
How many institutional investors were involved in the survey?
The survey involved 480 institutional investors including traditional asset managers, private market managers, insurance companies, and asset owners.
What are the key challenges faced by institutional investors in private markets?
Key challenges include challenging economic conditions, borrowing costs, supply of quality deals, fundrising difficulties, and quality data availability.
What are the potential roles of AI in private markets?
AI and machine learning are considered to have the potential to significantly enhance private market operations, improving risk management and forecasting capabilities.
What is the full report of the survey?
The full report of the survey is titled '2024 Private Markets Outlook: From headwinds to tailwinds' and can be accessed by clicking on the hyperlink provided.
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