BenefitsPensionMagazine:WhyPensionPlansareRealigningPrivateEquityAmidLiquidity,DurationPressures
By Josh Welsh
August 1, 2025
Excerpt from article:
The overall role of alternatives in institutional portfolios isn’t exactly diminishing, but the expectations around them are shifting, particularly as concerns about liquidity and predictability come to light.
While public equities still carry too much volatility for liability-matching strategies, allocation to alternatives remain critical. What’s changing, according to Stephen Johnston, is the makeup of that alternatives bucket.
He noted that while allocations to alternative investments will likely remain stable, often making up between 25 per cent and 40 per cent of a pension plan's portfolio, the composition within that category is undergoing a significant realignment.
“The era of investing in the world's 10 largest private equity funds and expect that to generate good returns is over,” said Johnston, private equity manager and director at Omnigence Asset Management, noting the strategies that rely primarily on leverage and financial engineering simply don’t generate returns the way they used to.
While he doesn’t believe institutional investors are abandoning private equity altogether, he acknowledged they're becoming far more cautious about where they allocate new capital.
“You're going to see much less plain vanilla, over-financialized, like traditional private equity. I don’t know that I would describe it as they’re pulling out,” he added, “but I would certainly describe it as they’re evaluating additional allocations very stringently.”
Original article here