Nearly three-quarters of pension managers expect higher private equity distributions

Nearly three-quarters (74%) of US pension plan managers expect private equity distributions to rise over the next three years. However, opinions are divided on whether the primary benefit of private assets lies in their returns.

According to Ortec Finance’s latest survey, 40% of managers cited returns and illiquidity premiums as the top reason for investing in private assets. Meanwhile, 34% prioritized diversification and 26% highlighted inflation protection as the primary motive.

Despite the benefits and growing allocations, US pension plan managers have varying views on optimal private asset exposure. Half (50%) consider a maximum allocation of 20% to 30% appropriate for their funds. Whereas 34% favor an allocation of 30% to 40%, 6% prefer 40% to 50%, and 10% opt for 10% to 20%.

The plan to increase private equity distributions over the next three years follows a period of low distributions in recent years. Among the 74% anticipating higher distributions, 38% predict they will be much higher, while 36% expect a slight increase. Meanwhile, 12% foresee a decline, and 14% believe distributions will remain unchanged.

This suggests pension managers expect to reap the return benefits of their private asset investments, according to the report.

In addition to understanding distributions, pension managers must strategize how much to allocate to private equity and other private assets, as 90% reported that their views on distributions have an impact on their pacing strategy. Of these, 26% believe these views will have a significant impact, while 64% expect a slight impact.