Institutional investors are continuing to move capital into alternative investment and real asset sectors, with assets in infrastructure, private equity and real estate gaining in the one- and five-year periods ended Sept. 30.
Venture capital saw relatively modest gains this year at 4.9%, to $43 billion, according to Pensions & Investments' latest survey of the 1,000 largest U.S. retirement plan sponsors.
All but one of the 14 investors with venture capital portfolios of $1 billion or more witnessed gains, most in the double digits for the year. However, the consultant to the plan with the most defined benefit assets in venture capital, the $100 billion pension plan of the Washington State Investment Board, Olympia, has combined venture capital with growth equity since 2017. Washington State reported $4.4 billion in venture capital as of Sept. 30.
Overall, Pensions & Investments' data reflects an ongoing macroeconomic trend, industry insiders said.
"The private markets are taking share from the public markets," said Scott Voss, Boston-based managing director at HarbourVest Partners LLC.
Investors continue to turn to alternative investments because they believe they will get a higher return than in the public markets. Indeed, with private companies choosing to stay private longer for the last several years, private markets are getting larger, Mr. Voss said.
Among the defined benefit plans of the 200 largest U.S. plan sponsors, infrastructure assets increased by 18.1% to $33.9 billion during the year and 164.8% over the five years, while real estate rose by 6.1% to $355 billion and by 23.8% for the five years ended Sept. 30. The year-over-year growth of infrastructure was slower than last year's survey results, when assets were up by 24.2%, while real estate assets have increased at a steady 6% rate for the last three survey periods.
Real estate asset growth reflected in this year's survey are in line with returns. The NCREIF Property index was up 6.24% during the 12 months ended Sept. 30.
The top three real estate investors on this year's list are the $384.4 billion California Public Employees Retirement Association, Sacramento, with assets up 6.3% to $37.1 billion; $243.3 billion California State Teachers' Retirement System, West Sacramento, with a 13.61% increase to $34 billion; and $157.6 billion Texas Teacher Retirement System, Austin, up 18.15% to $21.7 billion.