Strategize Success: Unraveling the Secret Strategies of Leading CIOs in Developing Sophisticated Private Equity Portfolios. Now Streaming Live.
In the dynamic world of finance, top institutional investors are navigating complex multi-asset portfolios in private markets with a strategic approach that emphasises asset allocation, governance, sustainability, and liquidity management.
Garvan McCarthy, Partner and Chief Investment Officer (CIO) at Mercer, is leading the charge in this area. With over 20 years of experience at the firm, McCarthy currently heads Mercer's Alternatives activities across the International region. His expertise extends to private credit, private equity, and real assets, and he is a Chartered Alternative Investment Analyst (CAIA).
Private credit, for instance, often employs multi-asset credit mandates, allowing managers to allocate across both public and private credit markets. This dynamic approach enables investors to capitalise on relative value, combining high-yield bonds, senior loans, and less liquid credit opportunities. Team alignment is also crucial, with asset managers reorganising their teams to foster collaboration between public and private credit analysts.
In private equity, institutional investors typically become Limited Partners (LPs) in private equity funds. Platforms like iCapital and EQT Nexus offer streamlined access to these strategies, often with lower investment minimums compared to traditional LP positions. Private equity investments are increasingly being considered as part of broader portfolio diversification strategies, potentially replacing or complementing traditional asset allocations.
Real assets, such as infrastructure and real estate, are accessed through specialized funds or platforms like EQT Nexus. These investments offer stable returns and diversification benefits, making them attractive for multi-asset portfolios seeking to mitigate market volatility.
Governance is another critical aspect. Platforms like iCapital and Moonfare conduct thorough due diligence on fund managers and operations, simplifying the investment process for institutional investors. Regulatory changes, such as updates to European Long-Term Investment Funds (ELTIF), are facilitating greater accessibility to private markets for a broader range of investors.
Liquidity management is addressed through structures like interval funds and feeder funds, which allow managers to dynamically allocate assets while maintaining liquidity by periodically offering redemptions. Private market investments often require a long-term commitment, but this is managed through diversified portfolios and strategic asset allocation.
Sustainability considerations are increasingly integral to investment decisions. Institutional investors are focusing on Environmental, Social, and Governance (ESG) factors when selecting private market investments, ensuring alignment with long-term sustainability goals.
The future outlook for private markets is promising, with regulatory shifts and technological platforms expanding access to individual investors and making private market investments more accessible. As these investments become more mainstream, they are being integrated into traditional portfolios, potentially altering the traditional 60/40 stock-to-bond ratio to include a larger allocation to alternatives.
Antoine Colson, CEO & Managing Partner of IPEM, joined the firm in 2017 following his encounter with Gilles Barissat, founder of the event in 2016. The panel discussion focused on strategies for institutional investors to succeed in private markets amid volatility, liquidity challenges, and evolving asset classes. Sustainability and ESG integration, as well as liquidity management, were discussed as important considerations for long-term private market success.
Nick Fitzpatrick, an Editor working with Funds Europe & Funds Global, moderated the session. Fitzpatrick has over 20 years of experience as a financial journalist, specialising in private markets and technology. The session also included Antoine Colson, who brings experience from the tradeshow and event industry, private equity, and various roles at Saint-Gobain and The Walt Disney Company.
In conclusion, the strategic approach to managing complex multi-asset portfolios in private markets involves leveraging diverse asset classes, employing sophisticated governance structures, and focusing on sustainability and liquidity management. This approach is evolving with regulatory changes and technological advancements, offering new opportunities for both institutional and individual investors.
Investing in private markets, such as private credit, private equity, and real assets, is being led by institutional investors who are reorganizing their teams to foster collaboration between public and private credit analysts. Technology platforms like iCapital and EQT Nexus are providing streamlined access to these strategies, allowing for diversification and potentially replacing or complementing traditional asset allocations.
In the future, the integration of private market investments into traditional portfolios could alter the traditional 60/40 stock-to-bond ratio to include a larger allocation to alternatives, partially due to regulatory shifts and technological platforms expanding access to individual investors.
