2014年-WEF世界经济论坛_Direct_Investing_by_Institutional_Investors_40页_1mb

Summary of Direct Investing by Institutional Investors: Implications for Investors and Policy-Makers

Core Content

This report explores the trend of direct investing by institutional investors in illiquid assets such as private equity, infrastructure and real estate. It highlights the implications for investors, asset managers, and policy-makers, and provides a historical perspective on the development of direct investing, as well as predictions for its future trajectory.

Main Points

Definition of Direct Investing

• Direct investing refers to when an asset owner makes the decision to invest in a specific asset, such as a toll road, rather than investing through a third-party fund.
• The investment decision must remain with the asset owner, though they may use service providers for other steps in the investment process.

Key Models of Direct Investing

• Solo direct investing: The purest form, where the institution retains full control over investment decisions and often performs due diligence and asset management.
• Partnership direct investing: Involves collaboration with other asset owners or asset managers to invest in specific deals or a series of deals. This model helps mitigate risk and enhance deal sourcing.
• Co-investing: A middle ground where the institution invests in a fund managed by an asset manager and may also make direct investments alongside the fund. It is the most popular and least demanding model.

Historical Trends

Pre-1880–1980: Early Institutional Investing

• Most institutions invested directly in safe, liquid assets like government bonds.
• Some, however, retained direct investments in real estate and unlisted equities.
• The Dutch East India Company (1602) is an early example of direct investment in equity.

1980–2000: Rise of the Alternatives Industry

• External managers became more widely used across asset classes.
• Private equity and hedge funds saw rapid growth during this period.
• Institutions began to appreciate the diversification benefits of illiquid assets.

2000–2007: Maturing of Illiquid Investment Markets

• Private equity and certain hedge funds performed well during the dotcom crash.
• Sovereign wealth funds emerged as significant players in illiquid investments.
• Infrastructure equity and infrastructure debt markets expanded rapidly.

2007–2009: The Financial Crisis

• Market volatility and diversification failure led to significant losses for many institutional investors.
• Institutions questioned their risk management and return strategies.
• The flow of information between asset managers and investors was strained.

Post-Crisis Years (2009–Present)

• Confidence in illiquid assets was gradually restored.
• Direct investing became more attractive due to the potential for higher returns, greater control, and better value for money.
• Governance frameworks and investment maturity are critical for institutions considering direct investing.

Current State and Constraints

• Direct investing is becoming more common among large institutional investors (those with over $50 billion in assets).

• Size and governance are the main constraints on direct investing.

  • Large institutions have the resources and capacity to manage direct investments.
  • Robust governance structures are necessary to manage downside risks.

• The report estimates that approximately $700 billion of institutional assets are directly invested, though this is not expected to dominate the market.

Future Outlook

• Co-investing is likely to remain the most popular model in private equity.
• Partnerships may become more common, especially in specific asset classes and regions.
• Direct investing is expected to grow slowly relative to overall institutional asset growth.
• Governance and investment strategy flexibility will play a key role in shaping the future of direct investing.

Implications

For Asset Owners

• Direct investing allows for greater control and longer-term planning.
• Institutions need to assess their capacity and governance structures before pursuing direct investments.
• Investment maturity and asset type influence the extent of direct involvement.

For Asset Managers

• Asset managers must redefine their role in the investment value chain.
• They may need to become service providers or specialists to accommodate the growing interest in direct investing.
• Fee structures and value proposition will be critical in retaining institutional clients.

For Policy-Makers

• Direct investing has stabilizing effects on capital markets due to its long-term nature.
• It can provide important capital for sectors like infrastructure.
• Policy-makers should enhance frameworks to support cross-border investments.
• They should distinguish between ownership and control and focus on the economic substance of transactions.

Conclusion

• Direct investing is not a new phenomenon, but it has gained increased attention in recent years.
• While it may not displace traditional models, it is expected to grow steadily.
• The key drivers are return enhancement, control, and value for money.
• The main constraints are size, governance, and resource allocation.
• The evolution of direct investing will influence delegated investing and global capital flows.

Key Recommendations

• Institutions should evaluate their capacity and governance before committing to direct investing.
• Asset managers should consider specialization and service provision to adapt to the changing landscape.
• Policy-makers should support cross-border investment and develop regulatory frameworks that facilitate direct investing while focusing on economic substance.

References

• The report is part of a broader series on long-term investing by the World Economic Forum.
• It was prepared in collaboration with Oliver Wyman.
• Insights were gathered from industry practitioners, policy-makers, and advisers.