Large asset owners expect to increase their allocations to private credit, private debt and infrastructure over the next 12 months amid geopolitical uncertainties, according to Mercer's "Large Asset Owner Barometer 2025" report issued April 29.
Large asset owners are defined as having at least $2 billion or more in assets.
Specifically, nearly one-half of such respondents (47%) expect to increase their portfolios’ allocation to private debt and private credit over the next year, while 46% expect to increase their infrastructure allocations.
Some 70% of the largest asset owners from this group (those with more than $20 billion in assets) intend to increase allocations to private debt/credit in the next 12 months, while 63% intend to invest more heavily in infrastructure.
The report also found that while large asset owners are confident that their portfolios are well-positioned to withstand a range of shocks over the coming year, they still consider themselves more vulnerable than they were a year ago, the report noted.
Looking at the next 12 months, 35% of large asset owners cited geopolitical risks as their No. 1 concern, up from 31% in 2024. That was followed by inflation (31% in 2025 compared with 22% in 2024), and monetary tightening (30% vs. 23%).
Over the past year, large asset owners have taken various measures to protect their portfolios from risks, including adjusting the duration of fixed-income allocations (53%) and adjusting the geographic exposure of assets (47%). Almost one-half (45%) of respondents increased their allocation to private markets, a trend that is set to continue in 2025, Mercer noted in the report.
“Equity, fixed income and currency markets are experiencing volatility due to trade tensions, but, from our data, we can see that large asset owners are positioned for the long term and appear broadly sanguine about shorter-term market moves,” said Eimear Walsh, Mercer’s European head of investments, in a news release issued in conjunction with the report. ”That said, in the year ahead, they plan to make some strategic portfolio adjustments, just as they did last year, to mitigate the risks and exploit the opportunities they see emerging.”
In addition, Rich Nuzum, executive director of investments and global chief investment strategist at Mercer, said in the news release: “Only 5% of the asset owners surveyed manage their investments entirely in-house. In an increasingly complex investment environment, we see a significant appetite among large asset owners for outsourcing investment management, with the most complex asset classes often being handled by outside teams.”
Moreover, European large asset owners are more concerned about how geopolitical threats may negatively impact their portfolios compared with their U.S. peers. Some 43% of European large asset owners believe their portfolios are vulnerable to such threats in the next three to five years, compared with only 18% in the U.S.
However, unlike large asset owners in the U.S. and U.K., European respondents appear to be more optimistic about investing in the equities of their domestic markets. More than one-third (34%) of European-based large asset owners expect to increase allocations to European equities over the next 12 months. In contrast, on average, respondents in the U.S. and U.K. are more likely to decrease allocations to their domestic equity markets.
In addition, some 48% of European large asset owners allocated investments to private markets in the last 12 months, while only 27% of their U.S. peers did so. Mercer noted that European respondents have been underallocated to private markets compared with their U.S. peers and now might be seeking to close this gap.
The largest global asset owners (with assets exceeding $20 billion) are more likely to incorporate sustainability goals into their investment objectives, with 81% of this segment including these goals in their policies, compared with 64% among smaller asset owners. Moreover, over the next 12 months, nearly a quarter (24%) of all large asset owners intend to increase their allocation to ESG/sustainable funds, and 29% expect to increase their exposure to impact strategies.
However, the number of large asset owners planning to set climate transition and net-zero targets is falling. Over one-third (39%) are not planning to set net-zero targets (up from 29% last year), and 39% are not planning to set climate transition targets (up from 8% last year).
The report surveyed global asset owners representing more than $2 trillion in assets in the aggregate from Oct. 1, 2024, to Jan. 15, 2025, and encompassed 74 organizations from more than 16 countries.
Mercer, a unit of Marsh McLennan, has $17.5 trillion in global assets under advisement and $613 billion in global assets under management.
