The Big Picture THE BIG PICTURE: PRIVATE MARKETS SET FOR BUMPER YEAR
A growing attraction: Public pension plan investment in real estate
$0bn $2bn $4bn $6bn $8bn $10bn $12bn $14bn
149 134 114 101 88 81 94 89 87
0 20 40 60 80
Q1 2019 Q2 2019 Number of commitments Q3 2019 Q4 2019 Q1 2020 Commitment amount Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Source: Nasdaq 98 118 110
100 120 140 160
Public pension schemes could not get enough of private assets last year. If the market is right, they want more... much more. Andrew Holt reports.
Public pension schemes in the UK, US and Canada increased their exposure to private markets last year, with momentum expected to continue into 2022.
Overall, they boosted their non-listed asset holdings by 18%, but this level of investment could be eclipsed by this year’s allocations.
Breaking 2021’s numbers down, public plan allocators reported commitments of $25.8bn (£18.9bn) to real assets – defined as infrastructure, natural resources and energy. This resulted in a significant 66% jump, year-on-year. Yet expectations for 2022 could smother those numbers, if the market is proved right. There are suggestions that 27 real asset funds will be launched this year seeking to collectively raise more than $65bn (£47.7bn).
Last year was also an active period for real estate, with public pension plans committing $41bn (£30.1bn) – a whopping 59%
more than they did in 2020 (see chart). Given the focus on infrastructure in the US and UK, it is not surprising that allo- cations to real estate in the coming 12 months are expected to surpass last year’s figures by some distance. So far this year, 28 real estate funds have secured $62.1bn (£45.6bn) in commit- ments, according to Nasdaq.
This focus on private markets has been spurred by the market dislocation created by the pandemic. Private debt is another beneficiary of Covid’s impact on the markets. In 2021 public pension plans committed a combined $39.7bn (£29.1bn) to the asset class, up 14% from 2020. Looking ahead to this year, 32 private debt funds seeking a total of $55.1bn (£40.5bn) in commitments are confirmed in the market – another substantial rise on 2021’s numbers. Last, but not least, private equity funds, where 146 public pension plans invested $84.3bn (£62.1bn) into last year, a 5% increase. This did not have as much attention as other private markets, but that could change. Nasdaq estimates that there are 248 private equity funds seeking $482bn (£354.3bn) this year.
Issue 111 | March 2022 | portfolio institutional | 9
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