Since the financial crisis of 2007-2009, there has been a major growth of interest in direct investing in illiquid assets as institutions seek sustainable, long-term returns. Institutions have approached direct investing in a variety of ways, depending on the type of institution and its size, goals and comparative advantage as an investor. Institutions with deep expertise and insight into a specific asset class within a specific geographic region, for instance, may be more motivated to invest directly in those assets. Similarly, institutions with a structure supporting swift decision-making may be more motivated to invest directly than those without such flexibility.
Direct investing allows institutions to invest in assets which, generally speaking, do not fit into the traditional asset manager model.
The focus of this section is on the key drivers and constraints of direct investing, how these shape the adoption of direct investing’s three main models and an estimate of the size of the direct-investing universe.