Mercer – Large Asset Owner Barometer, 2024

According to the Mercer - Large Asset Owner Barometer, 2024, large asset owners are confident in the positioning of their portfolios. They see their portfolios as resilient rather than vulnerable to various market risks in the next 12 months and the next three to five years. These investors have taken proactive measures in the past year to protect their portfolios from inflation and liquidity risks. Despite some indications that large asset owners see private market assets facing similar economic challenges as public market assets, they plan to increase allocations to private debt, private equity, and infrastructure. This is because they believe that private markets offer diversification benefits. These large asset owners believe that the outlook for US equities, UK equities, and real estate is challenging and plan to decrease their exposure to these assets in the coming year. This may be due to concerns about valuations in these asset classes, as well as a derisking strategy. Although there have been concerns about an ESG backlash, large asset owners intend to significantly increase their allocations to sustainable investment strategies. However, it is noted that only a little more than half of the respondents incorporating sustainable investment goals have set transition targets, and even fewer have started implementing the necessary steps to meet them. Currently, it is uncommon for large asset owners to set diversity, equity, and inclusion (DEI) targets for their investment teams. However, the largest investors, overseeing over $20 billion, are more likely to do so, indicating a potential growing focus on benchmarking DEI. Large asset owners generally prefer to outsource investment capabilities rather than managing portfolios in-house, especially for complex and resource-intensive asset classes, due to resource constraints and a lack of required talent and skill sets. While back- and middle-office risks, such as governance, operations, talent, and regulation, are considered significant risks to the investment objectives of large asset owners, only a small minority of investors ensure that their investment performance and capabilities are independently and externally assessed.