Preference shift: growing interest in single-strategy specialists among LPs
Among respondents, 37% foresee a shift in the allocation of their private equity commitments towards single‑strategy specialists in the coming years. This underscores the importance of specialisation and clarity of investment strategy.
Notably, North American LPs exhibited a stronger inclination towards specialists (51%) than their counterparts elsewhere. In addition, 13% of respondents anticipate a tilt towards multi-strategy platforms, whilst half of LPs anticipate no significant change in their allocation strategy.
Increased optimism among LPs regarding distributions in 2024
A notable 86% of LPs anticipate a rise in distribution levels for 2024. European LPs were the most cautious, with 77% supporting this view. Their US and APAC counterparts showcased a greater sense of optimism, with 91% and 95% respectively, expecting greater distributions.
Private credit poised for the largest target allocation growth among alternative assets
Some 45% of LPs expect to increase their target allocation to private credit in the upcoming year, a sentiment that has remained notably consistent since we have been asking this question in recent years.
Secondaries emerged as the asset class with the second‑highest anticipated allocation increase, 38% of respondents expressed intentions to bolster their allocation to the strategy. APAC LPs displayed the most appetite for the strategy, with nearly 70% planning to increase allocations. This underscores a robust interest in the strategy that may still be in its nascent stages in APAC compared to the rest of the world.
The private capital secondary market is proving particularly attractive to LPs given distributions are slow and exit opportunities are diminished. As a result, many LPs are looking to the secondary market for solutions.
Most LPs expect to make a first commitment to a new private equity manager
An overwhelming 86% of LPs plan on making a first commitment to a new manager relationship in any of the strategies in the next one to two years. Across the individual strategies, private equity garnered the most votes, with over three-quarters of respondents. Additionally, private credit and infrastructure emerged as stand-out strategies attracting LP interest, with 61% and 49% of respondents respectively indicating their intentions to initiate commitments with new managers across these sectors over the same period. This proactive stance highlights LPs’ efforts to diversify and explore opportunities across the spectrum of alternative investment strategies.
Private equity secondaries positioned for the most substantial growth across secondary markets – LP views
Private equity secondaries has emerged as the secondary strategy poised for the most substantial expansion over the next three years, with 73% of respondents expecting this to be the case. Additionally, private credit and infrastructure are anticipated to expand during this period with 63% and 60% of respondents respectively expressing confidence in growth.
Whilst real estate and venture strategies did not command the same level of confidence, both are expected to gain traction.
Collectively, it is evident that LPs foresee a growing and maturing secondary market.