Institutional investors and private-markets fund managers are tempering their expectations regarding future returns, a survey from eVestment shows.
Among respondents surveyed in early 2019, the most pessimism is among private equity funds, with 52% expecting private equity fund returns to decline in the future, while 36% expect returns to remain the same and only 12% expect returns to increase.
For venture capital funds, 47% expect returns to decline in the future, while 37% expect them to remain the same and 16% expect returns to increase. For real estate, 41% of respondents expect those returns to decline, while 45% expect them to remain the same and 14% expect them to increase.
"Due diligence remains the foundation for investors looking to build a quality portfolio and generate above market returns," said Graeme Faulds, director of product for private markets at eVestment, in a news release announcing survey results. "With the majority of survey respondents' outlook for returns to be flat at best, and a desire from investors to consolidate manager relationships, due diligence processes are only going to become more critical for both sides of the table. The need for fund managers and investors to embrace better data and technology to help them navigate this reality has never been more important."
When asked about their level of concern regarding the potential impact of a future significant market correction, 71% of investors were at least moderately concerned, while 59% of fund managers said they were at least moderately concerned. When asked about the timing of that correction, 96% of investors believe there will be one within the next three years, while 83% of managers believe it will take place within the next three years.
Institutional investors that responded to the survey were asset owners including pension plans, endowments and sovereign wealth funds, as well as investment consultants, representing $765 million in assets under management or administration. Fund managers represented $600 billion in private markets funds. The number of respondents was not provided.
The full report is available on eVestment's website upon request.