Private markets essential to investing success, says BlackRock

Institutions are allocating as much as 50% of their portfolios to private markets.

BlackRock Inc.’s Edwin Conway says big money clients are snapping up private investments for their portfolios.

Institutional clients are allocating anywhere from 20% to 50% of their portfolios to private markets, the global head of equity private markets told Bloomberg Television Thursday. Interest on the wealth side is “still in its infancy” but there has been a “tremendous amount of demand and growth,” with those clients allocating 2% to 5%.

“But the reality is they’re thinking about it in concert with their public market exposure. It’s not one versus the other, it’s one and the other,” he said. “So as we take a much more holistic approach to the portfolio of the future, it has to involve private markets as a critical ingredient for success.”

BlackRock revamped its credit and private asset business leadership in May to build more focused teams for those strategies. As part of the May overhaul, Conway was tapped to lead a group devoted to venture, private equity, infrastructure and growth equity investing, as well as investment strategies related to the world’s transition to clean energy. Previously, he was in charge of the firm’s overall alternatives unit.

Conway also said that 37% less capital has been deployed in private markets the first half of this year compared to the peak of the market in 2021, and there’s still about $2.49 trillion in private equity “sitting in dry powder.”

“So what you will see is a dearth of capital come to play,” he said. “Activity will pick up — hopefully in public and private — but valuations have started to normalize, things have gotten cheaper.”