Institutional Investors Expect to Raise Risk Tolerance for Private Markets

In their ongoing search for alpha, institutional investors are increasingly willing to raise their risk tolerance for private market investments, particularly in infrastructure, according to survey results released by Nuveen.

The percentage of large institutions owning private credit and equity investments has more than doubled over the last five years, Nuveen reported, based on its EQuilibrium survey. According to the firm, the momentum toward private markets “shows no sign of slowing,” with 66% of respondents saying they will increase their commitments to private investments over the next five years.

“After years of heightened caution, institutions are gradually shifting back toward growth-oriented strategies and becoming more comfortable adding exposure to risk markets,” the Nuveen report stated.

To make room for the capital needed to increase their allocation to private market investments, institutional investors need to shift their assets, the report found. According to the survey results, of the 39% of respondents who said they are going to reallocate capital to growth-oriented investments in 2025, 54% said they will increase their exposure to equities, nearly double the 28% from last year’s survey. Respondents also said they would extend fixed-income duration with investments such as private credit and infrastructure debt.

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When polled about which alternative asset that they currently hold that they plan to increase in the next two years, private infrastructure was cited by half of all respondents. Private equity and private credit were close behind, with 49% saying they will increase their allocation to both.

Meanwhile, the survey results indicated that reshuffling of portfolios will mainly be at the expense of private real estate and hedge fund investments. Some 14% of respondents said they expect to reduce their allocation to private real estate, while 12% said the same regarding their investments in hedge funds. The two were the only asset classes named by more than 9% of the institutions surveyed as classes in which they plan to reduce exposure.

Nuveen also reported that major investors are increasingly turning their interest toward higher-yield, higher-risk fixed-income investments, with infrastructure again drawing the most interest, followed by private infrastructure debt and private real-estate debt. Approximately 53% of respondents said they plan to up their allocation to private infrastructure debt, with 42% also eyeing an increase in private real estate debt.

“This marks a shift from last year when investment-grade fixed income was the top priority across both public and private markets,” the Nuveen report stated. “Institutions remain focused on diversifying their fixed income strategies to capture higher yields and optimize risk-adjusted returns.”

According to Nuveen, the survey included 800 institutions with aggregate assets under management of $19 trillion.