Key Takeaways
- • Institutional investors target private market allocations of 23% within five years, up from current average of 19%, representing a 21% increase in capital deployment despite structural barriers.
- • Liquidity concerns represent the primary obstacle, with 63% of asset owners citing it as the top barrier to expanding private market exposure, and the constraint hitting North America hardest at 70% of respondents.
- • Europe leads regional ambition with 25% private market allocation targets (versus 21% for North America and 23% for APAC), indicating divergent regional risk appetites and regulatory environments.
- • Private equity, infrastructure, and private credit are attracting the most new capital inflows, while real estate allocations face pullback pressure according to the Morningstar survey of 504 asset owners.
- • Publicly traded private credit and private equity ETFs are positioned to capture the gap between institutional demand for private exposure and the liquidity constraints preventing direct fund access, presenting an arbitrage opportunity for advisors.
Summary
Institutional investors are accelerating private market allocation targets despite mounting liquidity constraints, according to Morningstar's fifth annual Asset Owner Perspectives Survey released in September 2026. The survey of 504 asset owners—including pension funds, insurers, family offices, endowments, and sovereign wealth funds—found that average private market allocations will climb from 19% of current assets to 23% within five years. This expansion reflects growing appetite for diversification from public markets, cited by 56% of respondents planning increased allocations.
However, a substantial gap exists between institutional appetite and execution capability. Liquidity risk emerged as the dominant barrier, with 63% of respondents identifying it as the top constraint on expanding private market exposure. Geographic variation is pronounced: North America faces the most acute liquidity concerns, with 70% of asset owners citing liquidity risk as a primary obstacle. Europe demonstrates the most aggressive targets at 25% private market allocation (up from 20% currently), followed by APAC at 23% (from 19%), while North America trails at 21% (up from 18%).
The capital reallocation is selective across asset classes. Private equity, infrastructure, and private credit are drawing the strongest inflows, while real estate allocations face meaningful pullback. The survey carries substantial institutional weight: 57% of respondents managed at least $1 billion in assets, while 26% managed $10 billion or more, ensuring the findings reflect decision-making across major pools of global capital.
This liquidity-access disparity creates a direct market opportunity for publicly traded private credit and private equity ETFs. These instruments can bridge the structural gap between institutional demand for private exposure and the operational constraints of traditional fund structures, offering advisors a tool to accelerate client allocations without the lock-up periods and redemption restrictions inherent in direct private fund investment.
However, a substantial gap exists between institutional appetite and execution capability. Liquidity risk emerged as the dominant barrier, with 63% of respondents identifying it as the top constraint on expanding private market exposure. Geographic variation is pronounced: North America faces the most acute liquidity concerns, with 70% of asset owners citing liquidity risk as a primary obstacle. Europe demonstrates the most aggressive targets at 25% private market allocation (up from 20% currently), followed by APAC at 23% (from 19%), while North America trails at 21% (up from 18%).
The capital reallocation is selective across asset classes. Private equity, infrastructure, and private credit are drawing the strongest inflows, while real estate allocations face meaningful pullback. The survey carries substantial institutional weight: 57% of respondents managed at least $1 billion in assets, while 26% managed $10 billion or more, ensuring the findings reflect decision-making across major pools of global capital.
This liquidity-access disparity creates a direct market opportunity for publicly traded private credit and private equity ETFs. These instruments can bridge the structural gap between institutional demand for private exposure and the operational constraints of traditional fund structures, offering advisors a tool to accelerate client allocations without the lock-up periods and redemption restrictions inherent in direct private fund investment.
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