After years of allocation shifts toward private assets, alternative investment portfolios of the 200 largest U.S. retirement funds climbed sharply in 2021, as high as 85% in some sectors, pushed skyward by a combination of strong returns and fierce transaction activity.
Venture capital and private credit were the fastest-growing alternative investment asset classes tracked by Pensions & Investments' annual U.S. retirement plan survey, increasing 85% to $83.9 billion and 77% to $89 billion, respectively, in the 12 months ended Sept. 30. Private equity, which includes venture capital, increased 55.3% to $680.8 billion, with buyouts rising 48% to $381.2 billion.
Real assets, while seeing double-digit percentage growth for the 12-month period, didn't hit the highs of private equity and private credit. Infrastructure was up 39.5% to $57.6 billion, real estate investment trusts rose 22.1% to $34.2 billion and real estate equity was up 13.4% to $418.3 billion.
Helping the increases in venture capital and private equity was that 2021 followed a somewhat less active year in terms of number of transactions, which slowed considerably between March and September 2020, providing a lower baseline for comparison, said Adam Bragar, New York-based head of the U.S. private equity practice of Willis Towers Watson PLC. This was reflected in last year's survey results. Private equity rose 9.6% in the year ended Sept. 30, 2020, with buyouts up 17.8% and venture capital up 5.6%.