by Andrés Ramos, Content Marketing Specialist – Nasdaq Private Fund Solutions
Released in August 2022, the US Public Plan Asset Allocation Report from Nasdaq eVestment offers fund managers a detailed look into the demand for specific strategies from US-based public pension plan investors.
The report leverages Market Lens, part of the Nasdaq eVestment platform to analyze asset allocation disclosures provided by 228 U.S. plans managing assets of $4.0 trillion as of Q4 2021. While the report covers all asset classes, it offers some valuable insights on these investors’ commitment activity to the private markets.
Here are three key takeaways for private fund managers from the report.
1) Real estate and real assets see explosive growth on demand from public plans
The number of real estate commitments made increased markedly from 346 in 2020 to 533 in 2021, or +54.0% Y/Y. In terms of strategies, core, core plus, and opportunistic mandates drove the trend upward. Commitments in dollar terms also rose sharply from +$25.8 billion in 2020 to +$43.5 billion in 2021, or +68.3%. Real assets also saw explosive growth with the number of commitments increasing by +51.4% from 2020 to 2021 and the dollars committed increasing by +93.9%.
2) Commitments to private equity and private debt continue to rise
The number of commitments made and the dollars committed to private equity and private debt continued to rise into 2022. However, Market Lens documents indicate that public plans were over-allocated to private equity (+125 bps against targets) and only moderately under-allocated to private debt (-17 bps under target) as of year-end 2021.
3) Growth in number of commitments expected to outstrip growth in commitment size for private equity and private debt
The number of private equity commitments grew from 1,044 to 1,279 from 2020 to 2021 or +22.5%. Growth in private debt has been just as impressive with the number of commitments growing from 326 in 2020 to 383 in 2021 or +17.5 % Y/Y. Both these figures outpaced growth in commitment sizing over the same period. Going forward, the growth in the number of commitments is likely to continue to outstrip the growth in dollars committed as smaller public plans enter the private markets, i.e.: more commitments by count with smaller average ticket sizes.