Institutions shift portfolios towards private credit
Institutional investors are shifting their portfolios from public to private assets, according to separate surveys from State Street and JPMorgan.
State Street found that more than a third of institutions have allocated over 50 per cent of their portfolios to private markets, while 59 per cent have allocated 40 per cent or more. By 2028, 41 per cent are expected to have invested more than 50 per cent in private markets, and more than 71 per cent will have allocated at least 30 per cent to the sector.
Furthermore, State Street found that among private market asset classes, infrastructure and private debt are the top choices for investors, with 71 per cent anticipating increased allocations to each over the next one to two years.
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“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 and credit at State Street.
“Central bank decisions on rates and the state of inflation will heavily influence opportunities and investing behaviours over the next couple of years.”
Meanwhile, JPMorgan Private Bank’s Global Family Office Report found that family offices have invested 46 per cent of their total portfolio in alternative investments such as private credit.
This figure is even higher for large family offices based in the US. Among the American family offices which have assets of more than $500m (£398.5m), more than 49 per cent of funds were invested in alternatives compared with just 22 per cent in public stocks.
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Within these alternatives allocations, 19 per cent was invested in private equity, 14 per cent in real estate, five per cent in hedge funds, five per cent in venture capital and four per cent in private credit.
William Sinclair, head of the US family office practice at JPMorgan Private Bank, said that family offices are increasingly moving to alternatives in search of higher returns.
“These clients are taking a multi-decade view of their wealth, and they can take the illiquidity,” said Sinclair.
“Many of them are seeing opportunities outside of public markets.”
He added that he expects to see particular growth within the private credit segments of these portfolios, stating that many clients are still under-allocated in those areas.
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