Private Markets Remain Attractive in 2025 Despite Risks

Alternative assets, particularly private markets, remain a favored choice among US institutional investors, but concerns persist about limited investment opportunities and risks associated with the asset class.

The Natixis Investment Managers Institutional Investor 2025 Market Outlook found that investors are 60% bullish on private equity and 59% bullish on private debt.

Meanwhile, 65% of respondents believe that a portfolio consisting of 60% stocks, 20% bonds and 20% alternatives will outperform the traditional 60:40 portfolio.

Although enthusiasm for private markets remains high, 56% of institutional investors reported that the popularity of private markets is making it difficult to find investment opportunities.

Additionally, 67% of respondents noted that increased investment in private assets is heightening risks in institutional portfolios.

As a result, 70% of investors confirmed that they have increased their due diligence on private assets as they are concerned about deal quality.

The report also revealed that 59% of US institutional investors are bullish on stocks heading into 2025. With 73% of investors anticipating one to three rate cuts, 40% believe that these cuts will boost equity market gains.

Investors are also adjusting their portfolio strategies for the new year. In particular, there is a growing appetite for risk as the proportion of respondents actively derisking their portfolios has decreased from 58% in 2024 to 51%. While 35% reported they are actively taking on more risks.

Following a year where 76% of US institutional investors said their actively managed investments outperformed benchmarks, 60% expect active investing to once again surpass passive strategies in 2025.