At a time when alternative assets are booming, a range of products that includes private equity, private debt, infrastructure and real estate, the most professional investors still have a reduced weight in their portfolios, between 3% and 5%. But this percentage could easily double in the coming years, approaching the standard that already exists in other European countries, according to Tania Salvat, head of the institutional business for BlackRock in Iberia.
“Advisors are increasingly leaving behind classic 60-40 portfolios [con mayor porcentaje en renta fija] in your estate planning, where Private markets are no longer a satellite but an integral part of portfolios“underlines Salvat, who highlights that insurers, for example, only have an average of 5% invested in private markets, taking into account that many have direct investment in the real estate sector.
And this, in his opinion, provides a basis for growth to approximate the model of other European countries. “In Italy, this percentage is close to 10% and in Germany, 20%. That is to say, there is room for them to continue growing,” he predicts.
Private debt premiums
This growth potential occurs at a time when certain assets such as Private debt offers premiums between 150 and 500 basis points over corporate bondsin the European middle market segment, according to the manager’s calculations.
And although the normalization of interest rates has allowed the return of profitability to fixed income assets of higher credit quality, which is why it might be thought that the demand for private debt could be reduced, Salvat considers that they are complementary assets. “It is true that there are certain more opportunistic investors who sought higher returns when rates were at zero, and there may be imbalances in demand. But the majority of institutional investors will continue to invest in private markets“says the head of BlackRock’s institutional business in Iberia.
In fact, The manager estimates that the global volume of private debt could reach 3.5 trillion dollars in the next four yearss, slightly more than double what it has now, which currently represents 12% of the 13 trillion found in the universe of alternative assets.
“Beyond profitability, it is the diversification that they can bring to the portfolio. Clients ask us more about why they should have more weight in private markets in long-term portfolios,” he points out, and one of the reasons is profitability. . “In private equity or real estate, where resilience in performance is sought, there may be interesting entry points in new vintages of products,” says Salvat, despite the fact that there has been a readjustment of valuations.
“In the real estate sector we have already seen this repricing, depending on geographic areas. And in private equity it is also occurring, which allows for those attractive entry points to build long-term private market portfolios,” he says.
BlackRock is one of the global investment giants that is betting the most on alternative assets, as demonstrated by the recent purchase of Global Infrastructure Partners (GIP) for $12.5 billion. The volume of assets under management on its alternatives platform reached $330 billion, with data from the firm at the end of last year, of which 61,000 million are private debt; 28,000 million are for infrastructure; 42,000 million are from private equity; 27,000 million are from real estate; and 13,000 million are multi-asset products. And it has more than 900 professionals dedicated to this business segment.
But it is not only aimed at the institutional investor, but is also betting on getting closer to the retail client, such as the agreement reached with Bestinver to launch a fund of alternative asset funds. And his plans include expanding the distribution of products from private markets in the coming years.
“Financial education, flexibility and innovation in investment vehicles, such as Eltif, and distribution platforms, as well as greater transparency, have allowed there to be a breakthrough in marketing products from private markets to retail customers and even among large institutional investors,” emphasizes Salvat, who believes, however, that the role of advisors will continue to be fundamental.
“Having a technological tool makes contracting easier, but someone who helps understand what percentage of the portfolio is necessary in this type of asset is key. In fact, we We have eFront, which makes it easier for portfolio managers to have better control of their investment programs in private markets and be more efficient. The final advantage for managers and investors will be to gain transparency and better visibility of where their invested money is,” he concludes.
