Public pension plans invest USD154.6bn in private markets in 2020, but appetite for real estate and real assets plummets
Public pension plans tracked by investment data and analytics firm eVestment reported USD154.6 billion of commitments to private markets funds in 2020. This is a 2 per cent increase from 2019’s totals.
In a pandemic-impacted year that turned fund due diligence and the normal course of business on its head, 2020’s results clearly show how the investment business was able to pivot to virtual due diligence to eke out an increase in commitments compared to 2019. There were clear winners and losers across the asset classes tracked however, with both private equity and private debt having strong years while real estate and real assets saw significant declines in reported commitment totals.
Across all private fund commitments eVestment tracks, pension giant CalPERS was the biggest allocator of capital to private markets, with USD19.94 billion of commitments reported. CVC Capital Partners’ funds were the top destination for public plan money, raising USD5.2 billion from the public pensions eVestment tracks.
Private equity was a big winner in 2020, according to eVestment’s year-end data. Reported commitments to private equity funds grew 20 per cent year-over-year to USD83.1 billion. The 2020 total of 1,047 individual commitments represented a 9 per cent increase from 2019’s total number of commitments and the average commitment size in 2020 was USD79 million compared to USD72 million in 2019.
Private debt also saw an increase in commitments in 2020 compared to 2019, with USD33.7 billion in reported commitments from public pension plans in 2020, a 31 per cent increase from the segment’s final 2019 figure. The increased activity suggests that pension plans sought to take advantage of market dislocation caused by the pandemic by allocating to strategies focused on distressed opportunities and special situations.
Real estate investment opportunities were was amongst the economic and investment sectors hit hardest by the COVID-19 pandemic. Those effects were clearly seen in commitments to real estate managers through 2020. For the year, reported commitments by public pension plans totalled USD24.4 billion, a 31 per cent decrease from 2019.
Public pension plans reported commitments to private markets real assets investment funds also dropped precipitously in 2020, to a total of USD13.3 billion, a 38 per cent decrease from 2019.
As the pandemic began taking hold in the first quarter of 2020, most offices, stores, hotels, restaurants and other public spaces closed and millions of people fled large cities. Uncertainty about how people would use real estate and land and how much of it they would use and in the short and long term future clearly had an impact on real estate and real assets private markets fundraising in 2020.