According to a survey, institutional investors (LPs) showed their willingness to keep private equity..

According to a survey, institutional investors (LPs) showed their willingness to keep private equity investments unchanged despite delays in distribution payments.

According to the “2026 Global Alternative Investment Survey” released by Goldman Sachs Alternative Investment Project on the 22nd, LPs change their portfolio composition while maintaining the size of private equity investment agreements at existing levels.

More than a third of LP (37%) expected to increase investment execution from the previous year. About half (47%) said they plan to maintain a similar pace as last year. Only 11% said they would reduce funding.

The main stumbling block was by far ‘liquidity’. Thirty-five percent of LPs cited “lack of distribution” as the most decisive factor influencing their fund execution plans.

Mark Nahman, global head of Goldman Sachs’ asset management and WM division, said, “Despite the dynamically changing risk environment, customers are strictly adhering to investment principles.”

“LPs are never retreating from the market, but they are reorganizing their strategies on where, with whom, and under what conditions they will execute their funds,” he explained.

Geopolitical Tensions, Highest Risk for 3rd consecutive Year

For the third year in a row, LPs cited “geopolitical tensions” as the biggest investment risk. LPs including geopolitical issues as the top five risks were the most at 82%.

Inflation (67%) followed by a slowdown or recession in the U.S. economy (63%). In addition, 36% of LPs cited geopolitical issues as the single biggest risk (priority).

European, Middle East, and African (EMEA) investors were most concerned about geopolitical risks. Forty-four percent cited it as the biggest risk. This was significantly higher than in the Asia-Pacific (31%) and Americas (30%).

Artificial intelligence (AI) has also emerged as a new risk factor. 28% of LP cited “job substitution based on technological development” as one of the five risks. Most of the respondents who chose “Other” also mentioned AI-related concerns.

“Although traditional fund recovery has slowed due to geopolitical tensions and high interest rates, competition to build AI infrastructure is creating the most significant investment opportunities in the 2020s,” said Jeff Fine, global director of alternative investment business at Goldman Sachs.

“LPs consider these geopolitical tension factors as the most important variables when developing asset allocation and GP selection strategies,” he added.

Infrastructure, secondary investment drive optimistic outlook

Most LPs assessed that investment opportunities were similar to or better than a year ago. In the infrastructure sector, 43% said the outlook had improved. Only 7% of respondents said it had worsened.

In the secondary sector, the positive outlook (44%) greatly outperformed the negative outlook (15%) by a ratio of 3 to 1. Only 6% of the respondents said the outlook had deteriorated even in joint investment.

In the case of real estate, 37% said the outlook has improved. Sixteen percent said it had worsened. In private equity, 56% of respondents said there was no change in the outlook. Positive outlook was 24% and negative outlook was 20%.

Private equity loans saw the largest increase year-on-year, with a negative outlook of 35%. 65% still saw investment opportunities similar to or better than the previous year.

While 34% of hedge funds said their outlook had improved, less than 1 in 10 said it had worsened. In GP equity investment, the majority of LP (69%) said there was no change in their investment perspective.

There is plenty of willingness and room for investment, but delays in distribution are constraints

In the private equity market as a whole, LPs are still more likely to be “under-targeted” than “over-targeted.”

The number of LPs that said they did not meet the target proportion in private equity loans increased by 5%p from 43% to 48%. The number of LPs that said they exceeded the target share decreased from 12% to 4%.

Private equity loans and real estate were the most advanced in the asset allocation cycle, so the proportion of excess allocation was the highest (18%). This is also down from a year ago (25%).

84% of LPs said they would execute more funds than the previous year, similar to last year (83%). However, the percentage of expected investment execution expansion in detail decreased from 43% to 37%. The percentage of expected enforcement reductions also decreased from 14% to 11%.

Thirty-five percent of LPs cited a lack of distribution as the most influential factor in their fund execution plans. The figure is higher than last year (31%), ahead of the target share change (29%).

“The longer the investment recovery period has led to liquidity emerging as a major competitive edge,” said Stephanie Radar, global co-director of the alternative investment business at Goldman Sachs.

LPs are more actively using the secondary market as a key tool for asset allocation and cash flow management to build a solid portfolio, he added.

Each asset group has a different core task

When asked to pick the biggest single task for each asset group in their portfolio, LPs gave different responses.

Liquidity (28%) in private equity stocks and yield and performance (32%) in real estate were the biggest challenges. The biggest tasks were accessibility to investment opportunities (21%) for joint investment and selection of GPs (20% and 15% respectively) for private equity loans and infrastructure.

Meanwhile, corporate valuation was the most common concern throughout the entire asset group, ranking second in three of the five asset groups surveyed.

As a result of the short answer analysis, it was found that LPs are actively reevaluating their investment strategies even within the same asset group.

In private equity stocks, some LPs are refining and reducing their existing GP lineup, while others are turning to new GPs or small and medium-sized markets.

In the case of private equity loans, many LPs are diversifying their investment scope beyond existing direct loans to secondary, new investment areas, and Evergreen (open) structures.

In real estate, several LPs were moving to high-risk and high-yield strategies such as ValueAd and Opportunity to improve returns. Real estate loans are emerging as an alternative to existing private equity loans, and the distribution of funds is increasing.

By region, some LPs are reducing some of their U.S. exposure to increase investment in the European market. Europe was cited as the most notable region for investors trying to increase the proportion of overseas investment.

High threshold for new GP… “AI Reorganizes Alternative Investment Industry”

Existing GP superiority remains, it was found. Most LPs said that much of the investment agreements made over the past 12 months were GP re-investment (Re-up), which they had previously had a relationship with.

The most important factor for LPs when adding new GPs was by far operational performance (78%). In addition, LPs wanted elements to fill the gaps in their current portfolios.

In other words, it was found that △accessibility to new strategies or asset groups (50%), △ competency in specialized fields (39%) △ sector and regional diversification (35%) are desired.

LPs cited AI (34%) as the strongest driver that will change the alternative investment industry over the next five years. This significantly exceeded industry reorganization and integration and economic instability (13% respectively).

Analysts say that the focus of interest is now moving beyond just investing in AI-related themes to select GPs that will improve investment decisions and enhance portfolio corporate value.

A survey respondent pointed out, “As repeated in each huge technological transformation period, many will overestimate the short-term impact while underestimating the secondary and tertiary knock-on effects that will continue in the long run.”

Mike Brandmeier, Global General Manager and Chief Investment Officer (CIO) of Goldman Sachs Alternative Investment Group (XIG), said, “New managers must prove themselves that they are eligible for funds.”

“Past management performance is also important, but investors are now thoroughly verifying their strict investment review stance, solid monopoly advantage over competitors, and flexible adaptability to structural changes that AI will bring,” he added.

Meanwhile, the survey respondents included public and private pension funds, insurance companies, university funds and foundations, investment consulting firms, sovereign wealth funds and public institutions, family offices, asset managers and asset management agencies, corporate pensions, and retail platforms, including registered investment advisors (RIAs).

The proportion of respondents by region consisted of 43% in the Americas, 40% in Europe, the Middle East, and Africa, and 17% in Asia-Pacific. Korean institutions are also said to have participated in the survey.

Twenty percent of the respondents were large institutions with operating assets (AUM) exceeding $100 billion.