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CAPITAL MARKETS

Have private markets reached saturation?

Sovereign wealth funds have swamped private markets over the last decade, but there are questions whether the pace of investment can continue.

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Photo: iStock

Private markets: the magic bullet. Protected from the swings and plunges of volatile public markets; reliable returns; often resilient to inflation. Little surprise that the world’s most powerful institutions have poured so much capital in this direction. But have they poured more than those markets can absorb?

The latest version of Invesco’s annual global sovereign asset management study is the 10th, and Invesco has used the opportunity to look back through the last decade and draw out some themes.

Perhaps the most striking is that in 2013, sovereign wealth funds allocated 8% of their assets to private-market assets such as real estate, private equity and infrastructure. In 2022, that figure is 22%. Sovereigns now manage $719 billion in private assets. In 2011, the figure was $205 billion.

While the study focuses on sovereign wealth, the pattern is mirrored by other large institutional investors.

There’s ever-greater demand for private markets and supply that’s not able to keep pace with that demand
Asia-Pacific-based respondent to Invesco’s study

One can see the logic of the allocation, now more than ever.


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