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Alternative Market Briefing

Institutions return to private markets with a greater focus on ESG

Tuesday, January 12, 2021

Bailey McCann, Opalesque New York:

Institutional investor interest in sustainable investing could reach new highs over the next few years if recent investor sentiment data from Commonfund is any indication. According to Commonfund Capital's fourth-annual private markets survey, investors indicated a reduced allocation to private natural resources and energy, offset by increased allocations to PE-styled environmental sustainability. This year, 23% of investors indicated an upward trend for sustainability investments, which represented a significant increase compared to last year's survey.

Commonfund suggests that the uptrend reflects the adoption of new policies toward sustainability as well as the use of strategies that take a more sophisticated approach to ESG beyond simply negative screens.

Institutions are also on the hunt for other private markets allocations that could help mitigate risk from the broader global equities market and provide uncorrelated sources of return.

Investors in the survey rank mid-market U.S. private equity first in terms of performance potential for commitments made this cycle, with 58% indicating above average or high return potential. 40% of respondents are seeking out mid-market sector specialists and a further 30% are interested in mid-market generalists. Venture capital and secondaries strategies followed behind traditional private equity.

Actively managed funds are also top of mind for investors. According to the s......................

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