Private markets specialists adapt to macroeconomic risk as they pursue value creation for investors in 2023 and beyond

London, 23 February 2023 — Most private markets specialists (73%) identify macroeconomic conditions as their biggest concern for 2023, according to Russell Investments’ new global survey of 32 firms representing $1.6 trillion in total assets. The survey found private markets investment managers are adapting to this risk by focusing on high-quality assets, remaining defensive and capitalising businesses conservatively. They also are prioritising businesses that are less sensitive to supply-chain issues and have greater ability to pass on costs.

“Across the spectrum of private markets, our survey found money managers are positioning to exploit opportunities in private equity, real estate, infrastructure and credit in 2023 and beyond,” said Client Portfolio Manager Darren Spencer at Russell investments. “Private markets specialists are poised to create value over the medium-to-long term through actively managing businesses and assets, which in turn should serve investors well in a challenging and uncertain market environment.”

Russell Investments’ assessment of survey responses finds private markets specialists also expect the following key themes to unfold:

  • Lower public market valuations will drive resurgence of limited partner secondaries.
  • Interest rate stress, and the tightening of liquidity, will create attractive buying / rescue capital opportunities.
  • Purchase of high-quality assets will be underpinned by long-term thematics.

The survey explored private equity specialists’ perspectives on a range of topics, including:

  • Investment themes: Managers expect to see the resurgence of limited partner secondaries in the short-term, as private equity investors seek to rebalance their portfolios due to reduced valuations in public markets. In the credit arena, survey respondents expect more lender-friendly terms including stronger covenants, origination and unused line fees and prepayment penalties.
  • Opportunities: Managers are focusing on industries supported by long-term secular trends such as restoring of supply chains, decarbonisation and increased digitalisation.
  • Product: When looking at the structure of the funds they anticipate bringing to market over the next 12-24 months, the survey reveals that the democratisation of private investments continues to shift product development beyond institutional investors, who according to Russell Investments, currently hold 90% of total private assets. “We are witnessing greater democratisation of private investments as more high-net-worth individuals seek out the benefits of private markets that institutional investors have enjoyed for decades,” said Spencer. “Our survey indicates this trend will continue as more investors seek to find new sources of return and portfolio protection in a challenging market environment.”
  • ESG integration: Surveyed private asset firms cited climate action, affordable/clean energy, and sustainable cities/communities as their top three of the United Nations’ 17 sustainable development goals where they can have the biggest impact.

More highlights from Russell Investments’ private markets survey are available here.

About the Survey

Russell Investments’ online survey featured private market specialists from the firm’s extensive manager-research database. Conducted in late Q4 2022, the survey included 20 questions about the managers and their views on the state of private markets investing. Responses to several open-ended questions were assessed and summarised by Russell Investments’ professionals who focus on delivering private market solutions to help clients achieve desired portfolio outcomes.

About Russell Investments

Russell Investments is a leading global investment solutions firm providing a wide range of investment capabilities to institutional investors, financial intermediaries, and individual investors around the world. Building on an 87-year legacy of continuous innovation to deliver exceptional value to clients, Russell Investments works every day to improve the financial security of its clients. The firm has $276.5 billion in assets under management (as of 12/31/2022) for clients in 32 countries. Headquartered in Seattle, Washington, Russell Investments has offices in 17 cities around the world, including in New York, London, Toronto, Tokyo, and Shanghai.