Alternatives including private market allocations are taking up an increasing share of pension funds' and other asset owners' portfolios worldwide, according to a report commissioned by financial services firm Northern Trust.
Based on a survey of 180 global asset owners with investment portfolios ranging from $1 billion to over $500 billion, the findings highlight a growing focus on alternatives, operational efficiency, liquidity and risk management and the increasing role of technology and data in decision-making.
While asset owners continued to favor equities (42%) and fixed income (27%) in their portfolios, private market assets made up 13% of the average portfolio, and 86% of portfolios had some investment in private assets.
Liquidity management took on greater focus with 60% of asset owners noting that liquidity has become more important, with cash allocations averaging 11% of portfolios globally.
"As asset owners move into alts, that’s been coupled with a rise in incorporating risk and transparency in the data. In particular this means getting data in from disparate sources, and integrating it, so you have one overall view of your portfolio,” Mark Austin, who leads the growth strategy for the pensions and insurance business across the EMEA region at Northern Trust, told Pensions & Investments.
The survey gathered responses from senior leaders of pension funds, OCIOs and multi-managers, family offices, sovereign wealth funds, endowments, and other institution types across the Americas, Europe, Middle East and Africa and Asia-Pacific regions.
The study indicates some regional differences among asset owners, with EMEA and APAC allocating lower amounts to equities and more to cash than their U.S. counterparts.
Private debt was present in many institutional portfolios, with commercial real estate, private credit and direct lending, and residential real estate the most popular sectors.
Cryptocurrencies and other digital assets are invested in by 21% of those that allocate to private markets.
As of Dec. 31, Northern Trust had assets under management of $1.6 trillion.
