U.S. institutional investors increasing private market exposure, leaving ESG behind: report

Read: Diverse-managed funds receiving smaller allocations from U.S. institutional investors: report

The report, which was based on a survey of 699 individuals from 563 institutional investors with pension or investment pool assets greater than US$150 million, found that the adoption of environmental, social and governance factors is increasingly dropping.

Only 38 per cent of respondents said they consider ESG in their investment or manager selection decisions, compared to 47 per cent in 2023. A majority (93 per cent) said they expect their thinking on ESG to stay the same over the next 12 months. Similarly, diversity, equity and inclusion considerations were dismissed by 61 per cent of respondents in 2024, an increase from 52 per cent in 2023.

Concerns around asset allocation (45 per cent) was the leading response for challenges institutional investors faced in 2024, followed by market volatility (40 per cent) and rate of return and fining issues (29 per cent).

When picking strategic partner managers, U.S. investors prioritize a deep understanding of their goals and challenges (68 per cent), an ability to add value and provide advice beyond traditional services (51 per cent) and an outstanding relationship management service (46 per cent).

“Today, corporate plan sponsors are moving to take advantage of robust funding levels to achieve their long-held goal of minimizing pension risk,” said Mark Buckley, global head of investment management at Crisil Coalition Greenwich, in a press release.

Read: 66% of institutional investors increasing private asset allocations: survey