Key Takeaways
- • Institutional investors target private market allocations of 23% of assets within five years, up from current average of 19%, representing a 4-percentage-point expansion across pension funds, insurers, family offices, endowments, and sovereign wealth funds.
- • Liquidity risk emerges as the dominant barrier to private market expansion, with 63% of asset owners citing it as the top obstacle and 70% of North American respondents specifically flagging liquidity concerns as a major constraint.
- • Europe leads regional ambition with private market targets reaching 25% of assets (up from 20%), compared to North America at 21% (from 18%) and Asia-Pacific at 23% (from 19%), signaling divergent capital allocation strategies across geographies.
- • Private equity, infrastructure, and private credit are attracting the most new capital inflows, while real estate faces a pullback, indicating sector-level reallocation within institutional private market portfolios.
- • Publicly traded private credit and private equity ETFs are positioned to bridge the liquidity access gap, addressing the structural mismatch between institutional appetite for private market exposure and operational constraints preventing faster deployment.
Summary
Institutional investors across major global regions are pursuing aggressive expansion into private markets despite facing significant liquidity headwinds, according to Morningstar's fifth annual Asset Owner Perspectives Survey released in July 2026. The survey polled 504 asset owners—including pension funds, insurers, family offices, endowments, and sovereign wealth funds—with more than half managing at least $1 billion in assets and 26% managing $10 billion or more. The scale of respondents ensures the findings carry substantial weight across some of the world's largest institutional capital pools.
The survey reveals a clear divergence between institutional appetite and execution capability. Average private market allocations are expected to climb from 19% of assets today to 23% within five years, representing meaningful capital redeployment. However, liquidity constraints are proving the critical impediment to acceleration. Sixty-three percent of all respondents identified liquidity as the top barrier to expanding private market allocations, with the challenge hitting North America particularly hard, where 70% of asset owners cite liquidity risk as a key constraint. Geographic differences are pronounced: Europe leads with the most ambitious targets, expecting private markets to reach 25% of assets (up from 20%), while North America targets 21% (up from 18%) and Asia-Pacific targets 23% (up from 19%).
Within the private markets universe, capital allocation patterns are shifting. Private equity, infrastructure, and private credit are attracting the strongest inflows from institutional investors planning to expand exposure. Conversely, real estate is experiencing a pullback, suggesting tactical rotation within private market strategies. Diversification from public markets remains the primary motivation, cited by 56% of respondents planning increased allocations, underscoring the portfolio construction rationale driving the broader private market push.
The structural gap between institutional demand for private market exposure and the liquidity constraints limiting deployment has created a distinct market opportunity. Publicly traded private credit and private equity ETFs are positioned to fill this void, offering liquidity access while providing exposure to private market returns—effectively bridging the institutional "advice gap" and enabling advisors to serve client preferences for private market diversification without requiring lock-up periods inherent in traditional closed-end vehicles.
The survey reveals a clear divergence between institutional appetite and execution capability. Average private market allocations are expected to climb from 19% of assets today to 23% within five years, representing meaningful capital redeployment. However, liquidity constraints are proving the critical impediment to acceleration. Sixty-three percent of all respondents identified liquidity as the top barrier to expanding private market allocations, with the challenge hitting North America particularly hard, where 70% of asset owners cite liquidity risk as a key constraint. Geographic differences are pronounced: Europe leads with the most ambitious targets, expecting private markets to reach 25% of assets (up from 20%), while North America targets 21% (up from 18%) and Asia-Pacific targets 23% (up from 19%).
Within the private markets universe, capital allocation patterns are shifting. Private equity, infrastructure, and private credit are attracting the strongest inflows from institutional investors planning to expand exposure. Conversely, real estate is experiencing a pullback, suggesting tactical rotation within private market strategies. Diversification from public markets remains the primary motivation, cited by 56% of respondents planning increased allocations, underscoring the portfolio construction rationale driving the broader private market push.
The structural gap between institutional demand for private market exposure and the liquidity constraints limiting deployment has created a distinct market opportunity. Publicly traded private credit and private equity ETFs are positioned to fill this void, offering liquidity access while providing exposure to private market returns—effectively bridging the institutional "advice gap" and enabling advisors to serve client preferences for private market diversification without requiring lock-up periods inherent in traditional closed-end vehicles.
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