US and UK public pension funds allocated to 52% more mandates in 2018 than in the previous year, according to data from eVestment.
The most popular asset class for the second year running was private equity, with 954 new mandates awarded – 27% of the total. In 2017, private equity mandates accounted for 25% of all new allocations monitored by eVestment.
Public sector funds awarded 722 new listed equity mandates last year, up from 503 in 2017. Direct real estate allocations were the third most popular in both years.
In the UK, public sector allocations have been driven primarily by the ongoing pooling of assets among funds in the Local Government Pension Scheme system.
eVestment said the increased appetite for private equity among public sector investors could help improve transparency of costs and portfolios to levels that “may be new to many of these managers”.
“Public pensions have a variety of stakeholders to whom they are accountable when making investments,” said John Molesphini, eVestment’s global director of insights.
“As a result, private markets and other alternative managers looking to win public plan assets increasingly need to comply with transparency and disclosure standards they may be less familiar with to win these mandates.”
New mandates in 2018
New mandates in 2017
The popularity of private equity has caused a huge build up of unspent cash, or ‘dry powder’.
According to data firm Preqin, this sector accounted for more than half (58%) of the more than $2.1trn (€1.8trn) of dry powder available across private market asset classes at the end of June 2018.
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