Global investment into private assets is booming. In 2015, the industry had total assets under management (AUM) of around $3.5 trillion. By the end of 2020, just five years later, this had more than doubled to an estimated $7.4 trillion. Morgan Stanley estimates this figure will double again over the next four years.

According to recent report by IQ-EQ, Nomura and Barton Consulting, the majority of global investors surveyed — which included professionals working within family offices, financial institutions and private high-net worth ($15 million minimum) individuals across North America (27%), Asia-Pacific (40%) and Europe (33%) — are confident in the immediate future for the private capital industry.

“Global investment into private assets is growing exponentially. As a partner to many of the world’s leading investors, IQ-EQ, Nomura and Barton Consulting teamed up to get an even better look into the specifics of this surge, which is showing no signs of slowing,” said Steve Sokić, group head of private wealth at IQ-EQ.

A slim majority of respondents (52%) were very or extremely confident, while more than a third (36%) exhibited more lukewarm sentiment. Just over one in ten investors (12%) were not really confident at all

Source: The Rise and Rise of Private Capital (IQ-EQ, Nomura, Barton Consulting) 2021

Both professional and non-professional investors viewed most sectors within the private capital industry positively, and believe the prospects for fair pricing and returns are good. Overall, respondents were most positive about real estate (71%).

ASIA MOST FAVOURED

Most of the investors who took part in the survey reported that the majority of their private capital investments were focused on Asia and North America. The exceptions were those who invest in family businesses who were more focused on Western Europe, but this reflects the higher levels of family-owned business in that region.

Respondents believe Asia is the most exciting region for the private capital's future, with global investors highlighting the opportunities within real estate and private equity (at 35% and 36% respectively). The next most interesting regions for private investors were North America and Western Europe.

Source: The Rise and Rise of Private Capital (IQ-EQ, Nomura, Barton Consulting) 2021

However, when it comes to infrastructure, over a third of respondents (36%) believe the most exciting opportunities lie outside of Asia, North America and Western Europe.

On the potential for investment return, nearly 40% of investors surveyed viewed real estate as offering the best risk/return ratio, with 21% choosing private equity and just 12% going for venture capital as the most attractive.  

INVESTORS MOST EXCITED ABOUT BIOTECH

Biotechnology and information technology came out as the most exciting industries for private capital investment for over half of investors (51%), above financial services, land and real estate, and renewable energy. 

Source: The Rise and Rise of Private Capital (IQ-EQ, Nomura, Barton Consulting) 2021

The interest in biotech shows COVID-19's impact on investor psychology, while, according to the research, investors are enthusiastic about IT because the long-term trend for technology venture investment.

Investors are least excited about natural resources, manufacturing and wholesale and distribution at the moment.

As investment firms pivot towards sustainability mandates, what came as no surprise was that ESG featured high in the survey as one of the most talked-about and growing concepts in the private capital investment world.

Of those surveyed, 29% claim that ESG principles have a major role for them in investments. A large majority (85%) of investors have made ESG even more of a focus in the last 12 to 18 months.