In the past few years, demand has soared for private market assets as more and more investors have sought their diversification and improved outcomes. The COVID-19 pandemic has not dampened this shift, and many investors continue to be very active across private equity, private debt, and infrastructure, among others. This is particularly true in venture capital, often considered to be one of the riskiest subsets of this asset class.
 

Inflows to private markets indicate that investors are willing to put capital into higher-risk assets, with the reasonable belief that they could achieve a higher returns than traditional investments, and achieve their goals. In our annual alternative investments paper, we examine key considerations across the various private market asset classes from the perspectives of limited partners (LPs) and general partners (GPs).

 

Why invest in private markets?


There are three main reasons to invest in private markets – potential return enhancement, inflation protection and diversification. Most types of alternative investments offer some combination of these three desirable attributes. Explore more in our paper here.


 

 

 

In our 2022 report, we explore how investors should approach alternative assets – including private markets – and what factors are at play in each sector.

We also analyse regional and macro themes and how these are likely to affect the various areas of alternative investments.

Now, we are here to help you implement - discover our private market capabilities.


 

What we cover in the report

The 60/40 traditional portfolio: We present an analysis of the performance of a 60/40 portfolio of US public equities and US bonds over various 10-year periods, and describe what the addition of an alternatives investments' allocation into a portfolio could offer investors.

Private equity: The unique differentiating qualities of private equity have important implications for portfolio construction, manager selection, and governance – all of which we explore in detail.
 

  • European private equity: A busy end to the year has driven prices higher and swelled the size of funds investing in Europe, with the technology and healthcare sectors particularly affected. We explore the challenges this poses to many LPs and how they can handle them.

  • Asian private equity: Recent regulatory changes in China promise to have an important impact on private equity and venture capital markets across Asia. We explore the near-term and longer-term ramifications.
Venture capital: Many new types of investors are entering the rapidly evolving world of venture capital. We argue that this could be a sign of a market top, especially for late-stage venture capital markets, meaning LPs should be discerning with their investment decisions. 
Natural resources: The re-emergence of inflation has brought the natural resources sector back into focus as a potential tactical or strategic allocation for those concerned that inflation is not as transitory as it has been represented.
Infrastructure: The increasing prevalence of open-ended fund structures, as well as the impact of climate change initiatives and recently passed US legislation, will have a transformative effect on this already popular asset class. 
Private debt: Inflationary pressure is also paramount in the private debt sector. Floating-rate assets combined with other attractive characteristics may offer investors a way of mitigating inflation risk.
Real estate: Investors are increasing their allocations to real estate, attracted by higher yields and inflation protection. Demographics and the impacts of the pandemic are also influencing investor allocations.

 

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