Three-quarters of private markets investors say the time required to receive distributions has increased over the past year, yet 84% still intend to increase their exposure to the asset class over the next two years, according to new research from Brown Brothers Harriman.
The firm’s second annual Private Markets Investor Survey found that private equity was the most popular strategy for additional investment, selected by 54% of respondents, up 16 percentage points from the previous year.
Private credit recorded an even larger increase in interest, with 44% planning to increase allocations, compared with 24% a year earlier.
The findings are based on a survey of 500 institutional investors and wealth advisers across the US, UK, Germany, Switzerland and Japan, conducted in August.
BBH found that distribution delays were influencing investors’ liquidity requirements and their preferred investment structures.
Some 66% favoured a capital deployment period of four to six years, while shorter two- to three-year periods were the next most popular option.
The report identified evergreen funds as the preferred investment structure, with investors increasingly seeking flexibility over when capital can be accessed.
Respondents also reported responding to delayed distributions by retaining larger cash balances, moving towards more liquid investments or passing up investment opportunities while awaiting capital from existing holdings.
More than a quarter expected private markets to represent over 30% of their investments within five years, while 99% anticipated having some exposure by 2031.
The research also found growing demands for clearer information about redemption restrictions, liquidity calculations and the circumstances under which managers can suspend withdrawals.
BBH said investors were particularly interested in understanding how liquidity arrangements operated in practice, rather than relying solely on the availability of periodic redemption windows.
Lata Vyas, head of alternative client solutions at BBH, said investors were becoming more discerning about liquidity despite maintaining their commitment to private markets.
She said managers needed to provide greater clarity over redemption arrangements and investors’ ability to access capital when required.
The survey included 250 institutional investors and 250 wealth advisers. Its combined results should therefore not be interpreted as representing institutional LP sentiment alone.
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