MY ACCOUNT | NEWSLETTER |

Private Markets and Implications for Portfolios


What drives the transformation of private markets? How to effectively manage portfolios focused on this sector? According to PGIM experts, there are four factors for each question (the result of research involving the insights of over 40 investment professionals, including managers of private alternative, real estate, bond, and equity strategies, as well as prominent academics, investors, and sell-side researchers).

Here are the four factors guiding the transformation:

  1. High-risk loans shift away from traditional financing methods: Over the past 20 years, regulatory changes and shifts in the business model have led banks and various financial companies to distance themselves from riskier segments of corporate and real estate loans. According to the Federal Reserve (FED), the share of banks offering corporate financing was close to 70% in 1980, but by 2020, it failed to reach 40%.
  2. Private markets attract income and yield-seeking investors: In recent years, investors have had to broaden their horizons to find assets capable of delivering income and attractive returns. Currently, the median allocation of private market assets for the top 10 institutional investors is 23%. According to the FED, the allocation of U.S. pension funds to real estate and private equity was 20% in 2021, compared to 8% two decades earlier.
  3. Increasingly, business models are suitable for private markets: Some companies may be better appreciated and financed through private markets, such as those based on intangible assets like proprietary software or other intellectual properties. Conventional fossil fuel companies are also turning to private capital markets as some ESG-sensitive investors have excluded this sector from their investment portfolios.
  4. Companies remain private longer: The median age of companies at the time of listing has more than doubled in the last twenty years, reaching 11 years. This evolution is driven by the growing availability of private capital in various financing stages and the burdensome nature of information and the costs of going public, especially in developed markets.

Here are four implications for portfolios:

  1. Public and private markets have increasingly blurred boundaries, requiring more flexible approaches: The once-clear distinction between syndicated loans and private markets is becoming less evident. Consequently, the formerly distinct boundaries between public and private market investment teams at institutional investors are becoming increasingly blurred.
  2. Liquidity risk needs a more sophisticated approach: A comprehensive portfolio structure, including multiple time horizons, can be used for stress testing and building models for different market scenarios. These results can be compared with public market assets to gain a deeper understanding of the liquidity characteristics of the private alternative portfolio.
  3. The influence of ESG factors on private markets is recent but expected to increase: While it's a common belief that ESG issues are less important in private markets compared to public markets, private market investors play an increasingly significant role in emphasizing the need for more detailed ESG criteria reporting.
  4. Private investors can enter private markets with long-term defined contribution plans: There is a growing focus on creating responsible pathways for retail investors to participate in opportunities available in private markets, especially in defined contribution plans with a long-term investment horizon, potentially aligning well with the longer lock-up periods of private assets. However, there are significant challenges to widespread implementation in these plans.

Like0
Dislike0
  • Please enter a comment


Name *
Email address *
Comment *


* Required fields

Information on the processing of your personal data
We inform you that, in compliance with the provisions of current national and European regulations for the Protection of Personal Data and Services of the Information Society and Electronic Commerce, by sending us this form you are expressly giving your consent to Grupo Asís Biomedia , SL, (hereinafter, "ASIS GROUP") so that, as the person in charge, it may process your personal data in order to respond to your request for contact and information by electronic means.

Likewise, when you expressly consent, we will process your personal data to send you specialized information, newsletters, offers and exclusive promotions from GRUPO ASIS and related companies.

For the aforementioned purpose, GRUPO ASIS may transfer your data to other companies linked to GRUPO ASIS or to third party service providers for the management of electronic communications and other security services, even in cases where they are outside of the European Union, provided that they legally guarantee the adequate level of protection required by European regulations.

At any time you can withdraw the consent given and exercise the rights of access, rectification, deletion, portability of your data and limitation or opposition to its treatment by contacting GRUPO ASIS by sending an email to protecciondatos @ grupoasis.com, or by written communication to address at Centro Empresarial El Trovador, 8th floor, office I, Plaza Antonio Beltrán Martínez 1, 50002, Zaragoza (Spain), indicating in either case the Ref. Personal data and the right you exercise, as well as attaching a copy of your ID or replacement identification document.


I have read and accept the treatment of my data according to the informed purpose and according Legal notes and the Privacy Policy
I wish to receive commercial information from GRUPO ASIS and related companies



More news

Merck Animal Health Completes Acquisition of Elanco’s Aqua Business

Like0
Dislike0

Epidemiologic and tick exposure characteristics among people with reported Lyme disease – Minnesota, 2011–2019

Like0
Dislike0

Efficacy of Preemptive Analgesia with Amantadine for Controlling Postoperative Pain in Cats Undergoing Ovariohysterectomy

Like0
Dislike0

Major crossmatch compatibility of rabbit blood with rabbit, canine, and feline blood

Like0
Dislike0

Clinical Differences in Dogs with Enterococcal Bacteriuria Compared with Other Bacteriuria: A Retrospective, Case-Control Study

Like0
Dislike0

Newsletter

 
 

News of interest

EVENTS

Copyright © 2024 - All Rights Reserved
ISSN 2768-198X

Top