Institutional investors are set to increase allocations to private credit and secondaries over the next year, as macroeconomic and geopolitical uncertainty drives demand for more defensive strategies, according to Coller Capital’s Global Private Capital Barometer.
The biannual survey polled 110 institutional investors – also known as limited partners or LPs – who collectively oversee $2trn ( in assets. Nearly half (45%) said they plan to increase their allocation to private credit over the next 12 months, up from 37% six months ago. Meanwhile, 37% intend to boost their exposure to secondaries, up from 29%.
The findings are likely to resonate with UK defined benefit schemes already active in private markets, particularly as performance and liquidity concerns are shaping allocation decisions.
Defined contribution schemes, meanwhile, face mounting pressure to diversify through private assets.
As private equity fundraising slows and exit routes tighten, investors are increasingly using secondaries and continuation vehicles to access liquidity. – echoed by the new illiquid asset sales platform for schemes heading to buyout.
Geopolitical risk is a growing concern for LPs, influencing both asset allocation and long-term strategy.
Some 44% of respondents said their institutions had increased focus on geopolitical factors during portfolio construction, citing trade tensions, conflict and regulatory shifts – while 88% flagged geopolitics as a significant risk to returns over the next two to three years.
“New challenges call for new strategies, so as the world continues to confront increased geopolitical and economic uncertainty, it’s no surprise that investors are exploring alternative options to deliver returns.”
Jeremy Coller, Coller Capital
“This reflects growing concerns that political instability, regional conflicts and trade tensions could affect asset performance and capital allocation,” Coller Capital’s report stated.
It continued: “As inflationary pressures, macroeconomic instability and shifting trade policies create uncertainty, we believe investors will emphasise resilience and diversification in their portfolios to mitigate increasingly intertwined systemic and idiosyncratic risks.”
Other themes included a rise in spin-outs, with 36% of investors saying they had noticed more team members at private markets managers seeking to set up their own companies.
In addition, the survey reported growing appetite for evergreen funds and concerns around performance and manager loyalty.
Jeremy Coller, chief investment officer and managing partner at Coller Capital, said: “New challenges call for new strategies, so as the world continues to confront increased geopolitical and economic uncertainty, it’s no surprise that investors are exploring alternative options to deliver returns.”
