The discussion, which was held at the London Stock Exchange at Paternoster Square in central London, started with the participants looking back at some of the key factors driving the growth of private market allocations at institutional investors.
EMMANUEL DEBLANC: “If we look back some 15 years, so back to the global financial crisis, I think it became clear that some of the private market asset classes, such as infrastructure, showed performance and a fair amount of resilience. That confirmed the value of diversifying away from public markets. We also had an environment in terms of real rates that was pushing pension funds and insurers to look for incremental yield, which they could no longer secure via public markets route and traditional long dated treasury or government securities. There was a need for another source of duration. Taken together, this led big investors to allocate a good proportion of their book to private markets.”
MIREILLE ABUJAWDEH: “I agree that diversification and risk-adjusted returns were important drivers, but I also think that we saw some important structural shifts during this period. One such shift was the retrenchment of banks from lending, which led to the growth of private debt markets. Another structural shift was the fact that private companies are staying private for longer. Amazon, for example, IPO’ed after three years, while it took Uber some 10 years to IPO. That means that you need to invest in private markets to gain access to these types of companies today.”
EMMANUEL DEBLANC: “There is also a human aspect to this development and that’s the ability for asset managers to attract talent from the sell-side as a result of these structural shifts.”
YOU HAVE BOTH TALKED ABOUT THE DRIVERS AND STRUCTURAL SHIFTS RELATED TO INFRASTRUCTURE AND PRIVATE DEBT. WHAT ABOUT PRIVATE EQUITY?
MIREILLE ABUJAWDEH: “Private equity remains a significant allocation for institutional investors, but we’re seeing infrastructure and private debt attracting more interest. One reason is that in the last few years investors have been disappointed with the level of distributions.”
EMMANUEL DEBLANC: “The landscape has fundamentally changed and we can talk about a before and after early 2022. Today, we have inflation and positive real rates. I also think it’s important to recognise that investors are not necessarily worried about high or low inflation as much as they worry about the volatility of inflation. That’s difficult to manage and therefore there’s a need to hedge that inflation, possibly through a natural instrument or have it intrinsically through the infrastructure market for instance. I would agree that we see more interest in infrastructure and also private credit, because a large part of the private credit world is floating rate, which over the longer term would protect you against inflation.”
MIREILLE ABUJAWDEH: “I also think we need to recognize that there’s a huge financing gap when it comes to infrastructure. The need for investment is significant and can’t only be met by developed market governments that already sit on a lot of debt. We need private capital to help bridge that gap. Given the massive investment needed to meet growing AI data centre demand and the complexity of integrating both power and data centre development capabilities, we believe this is an opportunity set ripe for experienced infrastructure investors across digital infrastructure and energy.”
WHAT ABOUT THE TYPICAL BREAKDOWN OF A SOPHISTICATED INVESTOR’S ALLOCATION TO PRIVATE MARKETS, WHICH I GUESS IS TYPICALLY AROUND 20 PER CENT? IS IT STILL PRIVATE EQUITY THAT TAKES UP THE BIGGEST PORTION?
EMMANUEL DEBLANC: “Then you’re excluding real estate because that’s basically been there from the beginning. Of course, sometimes we treat it as a separate asset class but that’s because it’s typically such a big allocation. If we look outside real estate, private equity was the first asset class to emerge so in that sense, it’s still the biggest allocation.”
HOW DO YOU SEE THESE ALLOCATIONS DEVELOPING GOING FORWARD? DO INVESTORS HAVE THE RIGHT ALLOCATION ACROSS PRIVATE MARKETS GIVEN WHAT’S AHEAD OF US?
MIREILLE ABUJAWDEH: “Private credit and infrastructure make up around 20 per cent of private market allocations today and by 2030 we’re expecting that to grow to 30 per cent. Private equity and real estate are still the largest allocations, but the fastest growth is coming from infrastructure and private credit. Private credit is being accelerated by the need for CFOs to diversify their funding, and by trillions of dollars in loans migrating from bank balance sheets to longer-dated liability investors like insurance, pensions and wealth. Infrastructure, meanwhile, is driven by the fiscal constraints of states with aging populations, the AI and data center revolution and the energy transition.”
EMMANUEL DEBLANC: “I agree with that. The question is whether that’s the right allocation and that’s of course much harder to answer. Different investors will be solving for different objectives and these are not consistent across jurisdictions and regulatory regimes. However, what I would say is that I think European balance sheets need to allocate more to the future economy and that has been a bigger challenge in Europe compared to the US. I think we will see a shift here and there are of course many ways to get exposure to the future economy. If you look at data centres for example, that’s something that investors could get exposure to through real estate, private credit or indeed private equity.”
MIREILLE ABUJAWDEH: “We look at these mega forces, big structural changes that affect investing now and far into the future like demographic divergence, AI, geopolitical fragmentation, an evolving financial architecture and the low-carbon transition. These are all the underlying themes that change long-term growth and inflation outlook and are poised to create big shifts across economies and sectors. This creates major opportunities and risks for investors, and, for instance, investors can access the transformative possibility offered by AI through infrastructure, as well as debt, private equity and real estate.”
WHAT ARE SOME OF THE TYPICAL CHALLENGES THAT INVESTORS COME TO YOU WITH?
EMMANUEL DEBLANC: “We see a bit of everything because it all depends on the client. Some know exactly what they want to solve for and others are just open to discuss new themes. Others might want to diversify across more than one manager and come to us for that.”
MIREILLE ABUJAWDEH: “I would agree with that. What we see across investor types is growing demand for greater transparency and better data to drive investment decisions, risk management and portfolio construction. We recently acquired Preqin, a world leader in private markets data, in our pursuit to meet these client needs.”
EMMANUEL DEBLANC: “If you compare us to public markets, this is still a young and immature ecosystem with lots of silos and different systems. I think most private markets players will tell you that they’re trying to solve their data issues. A lot of what we do is tailor made so we don’t see the same standardisation, but it will happen. We’re seeing development in the private equity world, which is more mature. We could of course experience a jump given the development of AI, but it’s an unknown right now how fast it’s going to happen.”
IF YOU LOOK AHEAD, DO YOU THINK WE WILL SEE ANY NEW PRIVATE MARKET ASSET CLASSES DEVELOPING?
EMMANUEL DEBLANC: “The honest answer is probably that we don’t know. I think it’s more about the relative significance of different areas of the market. We can take commodities as an example. That’s a challenging asset class because there has been this shift away from financing mining, but at the same time we badly need some of these commodities. There could therefore be a return to this, but the how and when is currently very unclear.”
MIREILLE ABUJAWDEH: “What we are seeing is innovation in how we deliver the products, such as the development of evergreen structures. It’s fundamentally about democratizing access and making private markets available to a broader base of investors. The future standard portfolio may look more like 50/30/20 – stocks, bonds and private assets like real estate, infrastructure and private credit, instead of the classic 60/40. If we look at the wealth segment, the allocation to private markets is somewhere between 0 and 5 per cent and we expect that to reach 5 to 20 per cent by 2030.”
EMMANUEL DEBLANC: “I see this as a question about fairness. Up until now, these assets have only been available to the biggest investors, and they have benefitted from the performance and the diversification benefits. I think it would simply be unfair not to democratise, but we must also ensure that it comes with the right guardrails. And we must make sure people understand what they get into because you can’t make illiquid products magically liquid.”
WHAT ARE SOME OF THE RISKS THAT INVESTORS NEED TO PAY MORE ATTENTION TO WHEN ALLOCATING TO PRIVATE MARKETS?
MIREILLE ABUJAWDEH: “Investors need to pay close attention to the correlation with public markets. Liquidity is another risk – they need to consider this when allocating to private markets.”
EMMANUEL DEBLANC: “When we produce prospectuses and when we prepare documentation for investors, we have an extensive list of risk that we’ve got to go through. Rather than calling them hidden risk, I would say underestimated risk. I think one area that we and our investors should focus more on is risk related to geopolitics and politics in general. One of these is section 899 [an addition to the US tax code] and what the implications could be for investors. It’s quite difficult right now to understand the magnitude of that risk. We’re in a changing environment.”
WHAT ABOUT UNCERTAINTY AROUND TARIFFS AND POTENTIAL TRADE WARS. HOW IS THAT IMPACTING PRIVATE MARKETS?
EMMANUEL DEBLANC: “Firstly, it clearly has an impact on the M&A volumes. It creates uncertainties for individual business plans and also more uncertainty as to the direction of travel for the overall economy. Then there’s the cost of capital, which can be impacted as well. How do you price assets in this environment? That uncertainty means that investors tend to pause the acquisition of specific assets, or they slow down their allocation. However, private markets should be in a better shape because we have the ability to look past some of that volatility. However, the recovery is taking longer than we expected. If you look at the more long-dated asset classes, such as core real estate, we think the valuations are really attractive. We think this is an attractive entry point but the shape or the speed of recovery or valuations is probably going to be a bit slower.”
WHAT REGULATORY CHALLENGES DO YOU SEE WHEN IT COMES TO PRIVATE MARKETS?
EMMANUEL DEBLANC: “I think the key challenge we’ve got in Europe in particular is the fragmentation of regulatory regimes. That’s a real challenge for investors.”
WE STARTED THIS DISCUSSION WITH THE KEY FACTORS THAT’S BEEN DRIVING PRIVATE MARKETS TO THIS POINT. WHAT FACTORS WILL BE DRIVING PRIVATE MARKETS GOING FORWARD?
MIREILLE ABUJAWDEH: “I believe investors will continue to increase allocation to private markets because of the diversification benefits and returns to the overall portfolio. Another key driver is that investors increasingly prefer to work with a smaller group of branded, scaled, multi-product providers that can deliver solutions across their whole portfolios. We have seen this trend in public markets, where 77 per cent of all net money went to five global firms between 2019 and 2023; we are one of them. Private markets are following the same trend. The top six private markets firms captured 22 per cent of flows in 2019, 42 per cent in 2023, and 63 per cent in the first half of last year. We believe that trend will continue in private markets, and it’s our aspiration to be one of those, too.”
EMMANUEL DEBLANC: “I really think the focus should be on facilitating access to funding for companies for funding the future economy. That means dealing with climate change and investing in technology that should be supporting growth in Europe. I think Europe has an opportunity right now to capture some of those flows and to attract both talent and capital flows and I think private markets has a big role to play in that.”
IS SOCIETY, REGULATORS AND POLITICIANS DOING ENOUGH TO FACILITATE THAT?
MIREILLE ABUJAWDEH: “When we talk about Europe, we need more unified capital markets to broaden access to financing, improve market depth and liquidity and increase Europe’s global competitiveness. I believe we are moving in the right direction, and European policymakers have acknowledged the necessity for action. The threat of tariffs has served as a wake-up call for Europe. Now implementation is imperative.”
WHAT WOULD MAKE PRIVATE MARKETS WORK BETTER?
MIREILLE ABUJAWDEH: “Democratising access to private markets and increasing capital availability across the company life cycle. And I would add industry standards and regulations that promote entrepreneurship and technological innovations helping to foster an agile private equity and venture capital ecosystem.”
EMMANUEL DEBLANC: “I hope Europe can seize the current opportunity. It’s once in a lifetime opportunity because of the geopolitical context. Europe currently lacks behind in terms of capital markets and there’s a lot of catch up to do but there seems to be willingness to grasp the opportunity. We’re quite good in the early stage but we haven’t had the depth of access to funding that the US market has managed to provide. I think we need to reduce the gap to the US in how we’re able to fund innovation when we’re scaling up. There’s no shortage of talents and ideas in Europe. It’s the money that hasn’t flown into finance and therefore talent and companies have moved to the US to access the pools of capital there.”
IF WE MOVE ON TO ESG AND SUSTAINABILITY, HOW WOULD YOU DESCRIBE THE SUSTAINABILITY JOURNEY OF PRIVATE MARKETS AND HAS THE NEGATIVE DEBATE IN THE US HAD AN IMPACT?
EMMANUEL DEBLANC: “The recent election in the US hasn’t changed anything from our perspective. Our policies on sustainability haven’t really changed because they’re about fundamental issues, such as the need to deal with issues as climate change.”
MIREILLE ABUJAWDEH: “It’s ultimately about investing with a focus on assessing risks and opportunities. That has not changed. Investors are requesting more reporting, but what I’ve seen in the Nordics is that it’s now less about whether this is an Article 8 or an Article 9 fund and more about incorporating these factors in investment processes. They’re satisfied without insisting on a certain categorization of the fund.”
// Participants
• EMMANUEL DEBLANC
CIO, private markets at M&G Investments. He joined M&G in 2024 from Allianz Global Investors where he served as head of private markets. He previously spent nine years at BNP Paribas as a managing director, coheading a debt advisory and financing team.
• MIREILLE ABUJAWDEH
Head of family offices, endowments and foundations for Blackrock in EMEA and has over 15 years of experience in private markets. Prior to joining Blackrock in 2015, she was a member of KKR’s client and partner group and she also spent 12 years at Goldman Sachs.
This article was originally published in Nordic Fund Selection Journal, issue 04 2025.
