Asset Owners Turn to Private Markets as Concentration, Geopolitics Bite
Asset owners are leaning more heavily into private markets as concentration risk in U.S. equities and mounting geopolitical uncertainty challenge traditional portfolio construction, according to new research from Morningstar. The survey of 25 large institutional investors across North America, Europe and Asia-Pacific highlights a decisive shift toward private credit, private equity and real assets as investors seek greater resilience.
Morningstar found that concentration risk tied to the “Magnificent Seven” stocks and U.S. equities more broadly has become a major concern for asset owners, alongside policy uncertainty and geopolitical volatility emanating from the U.S. These pressures are pushing institutions to diversify more aggressively across asset classes and reduce reliance on public market beta.
“Asset owners act as stewards for some of the largest pools of global capital and as fiduciaries for a wide range of beneficiaries and key stakeholders,” said Lindsey Stewart, director of institutional insights at Morningstar. “As a result, they often find themselves on the forefront of shifts in the market environment, global investment strategy, and regulatory standards and policy.”
In that context, allocations to private credit and private equity are rising, with investors viewing them as tools to improve portfolio resilience in uncertain conditions. At the same time, asset owners are prioritizing inflation-linked and stable cash-flow investments such as infrastructure and real estate.
The survey also underscored ongoing challenges around measuring and assessing private market exposures, with transparency and data gaps still prominent. Some respondents pointed to artificial intelligence as a potential way to address those hurdles. Meanwhile, attitudes toward climate and broader sustainable investing are evolving rather than fading, as political and regulatory pressures reshape how asset owners implement and communicate their climate priorities.
