94% of Global Pension Funds are Either Invested in or Moving into Private Markets

Private markets remain an attractive investment for global pension funds, with 94% already investing in areas like private debt, private equity, and renewable infrastructure, or planning to do so as allocations in the asset class continue to rise.

The Schroders Global Investors Insights Survey found that private market investment is expected to be the top trend over the next three to five years, with 64% of DC pension funds and 54% of public pension funds predicting this shift. Whereas for DB pension funds, the trend ranks in the top three for 44% of respondents.

The energy transition and decarbonization emerged as leading key driver for private market investments, with 59% planning to allocate to this theme via private markets in the next one to two years, followed by technological revolution (56%) and sustainability and impact (42%).

Pension funds that are expecting to increase their allocation to private markets prefer private debt (51%) and private equity (49%). However, there are regional differences.

In the Asia Pacific and EMEA regions, pension funds favor private equity over private debt. In Asia Pacific, 61% of pension funds are increasing allocations to private equity, compared to 59% for private debt. Similarly, in the EMEA region, 63% of pension funds are boosting investments in private equity, while 46% are focusing on private debt.

Meanwhile in North America, 56% are planning to increase their allocation to private debt over the next 12 months, while only 30% are with private equity.

According to Schroders strategists, private debt has long been a staple component in pension fund portfolios while private equity is gaining prominence as investors seek to capitalize in sectors that can benefit from market disruption and innovation.