2. Trends in Direct Investment: A Historical Perspective:
2.5 The post-crisis years
Despite these worries, by 2011 many institutional investors were regaining confidence in the long-term attractiveness of private equity and other illiquid asset classes.15 From 2009 onward, with interest rates at historic lows, investors increased allocations to illiquid and alternative assets to meet their return goals, with some opting to manage investments directly (Figure 716). Family offices, in particular, increased allocations to alternatives driven by increased confidence, attractive valuations, stronger potential returns and greater ability to add value.
Alongside with new ability to attract top investing talent from the downsizing and de-risking banking industry, this has helped direct-investing teams reach critical mass, enabling some, for example, to feel comfortable extending into emerging alternative asset classes. Simultaneously, traditional alternative investments have increasingly come to be regarded as a component of mainstream investing.
This growing confidence and interest in illiquid assets, however, is refocusing attention on the processes that institutions use to access these investments. Many investors have become more sceptical about the value offered by intermediaries, leading to a restructuring of intermediary relationships, shifts towards co-investing and direct-investing partnerships, as well as solo direct investing.
Section 3 explores these related trends and examines the forces that drive and constrain the adoption of new investment processes in different kinds of institutions.