Many LPs are seeking additional exposure to private capital markets with public valuations soaring and inflation becoming a concern, according to a survey from Eaton Partners, a subsidiary of Stifel Financial Corp. (NYSE: SF).
“Having navigated the Covid-19 pandemic for the past year, we find that many LPs are seeking additional exposure to private capital markets, and are being very deliberate when it comes to how they allocate investment dollars,” says Jeff Eaton, partner at Eaton Partners. “Institutional investors are making subtle but clear adjustments as inflation becomes an increasingly worrisome threat and real assets become much more desirable.”
About 52 percent of survey respondents said private market investments look more attractive, as public market valuations soar, while 37 percent said it makes no difference, and 11 percent said the private markets look less attractive.
When it comes to allocating budgets for private investments, the survey found that three-quarters, or 75 percent, of investors have enough capital for new investment ideas compared to 21 percent who said they are almost fully allocated for 2021. On the other hand, only four percent have already spent their entire 2021 budget.
Limited partners are planning to increase exposure to several strategies in 2021, according to the survey. Most specifically, 61 percent of investors are interested in venture capital and buyouts, followed by growth equity at 54 percent. Real estate received the least interest, with 17 percent of survey respondents saying they will increase exposure.
Along the lines of how remote working has affected engagement between fund managers and investors, 63 percent of respondents reported that there has been minimal impact all around, while 37 percent percent said that there has been a major disruption to prospective relationships, but minimum to existing ones. Nobody said there has been any major disruptions all around.
The online survey of 52 top institutional investors was conducted from March 23 through April 7.