Asset owners respond to geopolitical and trade concerns with move to defensive private markets asset classes
Limited Partners (LPs) are planning to increase their allocations to private credit and secondaries funds, according to Coller Capital’s biannual Global Private Capital Barometer.
The survey, running since 2004, found LPs plan to shift allocations to the relatively defensive asset classes, compared to riskier private market options such as private equity and venture capital.
The shift toward more defensive strategies is a response to growing macro-economic uncertainty, including geo-political changes and trade tensions, according to secondaries-focussed manager Coller.
The survey of 110 investors around the globe made two key findings, in connected areas.
Firstly, in terms of planned allocation changes for next year, 45% of LPs plan to increase their allocation to private credit and 37% plan to increase their allocation to secondaries. These figures had increased from 37% and 29% six months ago. Meanwhile, just 28% plan to increase private equity, down from 34%.
Secondly, in terms of risk management, 44% of LPs reported a heightened focus on geopolitical risk as a key factor in portfolio construction, with 88% stating geopolitics represents a significant risk to returns over the next two to three years.
Jeremy Coller, CIO and managing partner of Coller, said in a statement: “As the world continues to confront increased geopolitical and economic uncertainty, it’s no surprise that investors are exploring alternative options to deliver returns.
“LPs are continuing to increase their interest in private credit and secondaries and making new forays into evergreens.”
Secondaries transaction volume hit $160 billion in 2024 and is showing strong signs of growth, according to the UK-based manager.
LPs expect the volume of private credit GP-led transactions to increase over the next two to three years, 47% globally and 74% in among US investors, due to funds maturing and GPs seeking to replace them with new funds.
Secondaries are expected to perform strongly, according to Coller, with 54% of LPs expecting to transact in the sector in the next two years. It found 47% of investors in single-asset continuation vehicles stated they are performing at least in line with expectations.
Institutional LPs also appear set to increase their exposure to evergreen vehicles, traditionally used by retail and wealth investors, due to their superior liquidity and flexibility attributes.
The survey found that, over the next three years, 21% plan to maintain or expand their exposure to private equity evergreen funds and 22% plan to maintain or expand their exposure to private credit evergreen funds.