State Street Survey Finds Private Markets to Experience Significant Momentum in the Next Three to Five Years
December 16 2021 - 8:30AM
Business Wire
Survey findings forecast allocation to private markets will
increase for the near-term, but asset owners require improved data
standards and reporting
The demand for private markets investments by asset owners and
managers is expected to rise in the next three to five years as
investors seek higher yields and greater diversification, according
to a recent survey State Street conducted with 170 private market
asset managers and asset owners.
According to the survey results, asset managers expect that
their median allocation to private market assets will rise from 30%
to 35%, while asset owners believe it will increase from 22% to
28%. Respondents identified the most significant drivers of this
momentum to be diversification from listed markets (59% of asset
managers and 67% of asset owners) and better opportunities for
return generation (52% of asset managers and 52% of asset owners).
Forty-percent of asset managers also identify private markets as an
attractive and/or stable source of yield.
However, there are significant barriers to investing in private
markets. 64% of respondents are concerned about weak standards of
accounting and audit controls, 60% about high management fees
relative to public markets and 58% about lack of uniform data
standards. To maximize the next stage of growth in private markets
and meet rising investor expectations, asset managers will have to
improve their data management and reporting processes and adopt
more sophisticated technologies.
Access to data
The survey found that data quality and standardization is a key
barrier to increasing private markets allocations. Sixty-eight of
asset owners noted a significant opportunity cost to working with
private markets data and want a higher quality data provisioning
service. Fifty-eight percent also say data management and data
quality validation is now part of the due diligence process for
manager selection.
Asset owners require greater use of technology to improve the
quality and timeliness of information from asset managers, and they
increasingly want an accurate, top-down view of their portfolio
across all asset classes. To meet this demand and remain
competitive, managers will need to invest in a variety of data
tools and technologies.
“Having a single, unified data management platform to manage
data across the front, middle and back offices, is no longer a
‘nice to have,” said Paul Fleming, global head of State Street's
Global Alternatives Segment. “It will be what differentiates the
trailblazers from their competition in private markets for years to
come.”
ESG Remains a Priority
Survey findings also demonstrated that asset owners are seeking
private assets that make a “positive, measurable contribution to
sustainability or other ESG criteria,” with 61% of asset owners
expressing interest in more sustainable investment options.
Results showed a significant regional variation regarding views
on ESG themes. The survey found that only 13% of asset owners in
North America cited ESG investing opportunities as a top driver of
future growth in private markets investing, compared with 42% for
Europe-based investors. For asset managers, the figures were 21%
and 25%, respectively.
Overall, respondents reported that the lack of ESG data
standards are hindering progress. To address difficulties in
comparing potential investments and assess their sustainability
credentials, nearly half (49%) of managers say they will develop or
acquire ESG data tools for reporting and analysis within the next
two years.
Future of Private Markets Investments
The survey found that integration is a crucial element as
managers address the data and operations concerns around private
markets. Investors require providers that have sophisticated
technology to enable accurate reporting of performance, valuations
and ESG-related data. Asset managers are willing to explore new
data tools but are hampered by costs and concerns that wholesale
changes will disrupt day-to-day client services.
“It’s interesting to see that respondents remain largely
optimistic about the future of private markets investments, and
private market managers expect to see greater diversity of
investors turning to the asset class in the near future; however
investors in both public and private markets are realizing the risk
and inefficiencies created across their bespoke front, middle, and
back office solutions” said John Plansky, head of State Street
Alpha. “With the right technology and partners in place, asset
managers will be better equipped to overcome the challenges of
private markets and maximize value in the market boom still to
come.”
To read the full survey results, please click here.
About State Street Corporation
State Street Corporation (NYSE: STT) is one of the world's
leading providers of financial services to institutional investors
including investment servicing, investment management and
investment research and trading. With $43.3 trillion in assets
under custody and/or administration and $3.9 trillion* in assets
under management as of September 30, 2021, State Street operates
globally in more than 100 geographic markets and employs
approximately 39,000 worldwide. For more information, visit State
Street's website at www.statestreet.com.
*Assets under management as of September 30, 2021 includes
approximately $60 billion of assets with respect to SPDR® products
for which State Street Global Advisors Funds Distributors, LLC
(SSGA FD) acts solely as the marketing agent. SSGA FD and State
Street Global Advisors are affiliated.
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Media Contact: State Street Brendan Paul
Bpaul2@statestreet.com +1 401-644-9182
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