We are pleased to present our latest research publication, Navigating Market Divergence and New Narratives: Evidence from Long-term Investors, prepared in collaboration with State Street Associates. This comprehensive report delves into the strategic adjustments and portfolio reallocation decisions made by institutional investors and sovereign wealth funds in response to the dynamic market conditions of 2024.
Over the past year, investors have had to weather significant geopolitical and economic changes, particularly with the re-election of President Trump in the United States. The new administration's policies are introducing a degree of uncertainty in international trade and geopolitical risk, which is having profound implications for global financial markets. This report provides an in-depth analysis of how institutional investors and sovereign wealth funds have navigated these challenges, offering valuable insights into their strategic responses.
Key Highlights:
- Increased Allocations to Risk: In 2024, institutional investors and sovereign wealth funds looked to increase their allocations to risk, with equity allocations remaining near their decade-long peak.
- Demand for Private Market Assets: Market volatility led to increased investor demand for private market assets. Institutional investors are seeking more stable strategies, leveraging long-term investment horizons, and taking on risk in private markets due to their lack of liabilities.
- Growth in Alternative Asset Classes: There has been a significant increase in allocations to alternative asset classes. In 2024, two-thirds of investors allocated to private equity, and half allocated to other asset classes, such as private debt, venture capital, real estate, hedge funds, and infrastructure.
- Promising Private Markets Fundraising Activity: The first three quarters of 2024 saw promising fundraising activity, with $280 billion raised for private equity and private debt.
- Testing Portfolio Resilience in 2025: The year 2025 will act as a test for investors in terms of portfolio resilience and opportunities to identify tactical adjustments to allocation decisions.