Research from listed investment bank Numis has revealed that 71 percent of institutional investors worldwide intend to increase their exposure to private capital markets – including private equity and venture capital – in the next five years.

However, over the initial next three years, it is the growth capital end of the market that is set to receive the biggest increase, with 73 percent stating they will increase their allocation and invest in high growth private companies.

Numis’ research surveyed 200 institutional investors with a combined AUM of $4.5 trillion revealed that more are increasing their total allocation to private markets across the board. Currently, 38 percent have 10 percent or more of their funds in private markets, but that figure is set to rise to nearly half (45 percent) by 2030. Currently, 67.5 percent of institutional investors have 5 percent or more of their assets allocated to private capital, but that figure is also is set to rise to 75 percent by 2030 – demonstrating a rapidly expanding market.

When asked why they are increasing their focus on growth capital, 65 percent of institutional investors said it was because they have greater comfort in investing in illiquid, longer-term assets; while 61 percent said it was because attractive companies are remaining private for longer.

Many institutional investors also expect governments to make it easier for pension schemes to invest in unlisted companies and nearly 9 in 10 respondents (86 percent) expect regulatory changes to facilitate greater allocations to private markets over the next three years. In Europe today, pension funds contribute around 18 percent of venture capital and growth equity funds, and 71 percent of institutional investors expect this to grow over the next three years – with one in eight anticipating a dramatic increase.