Direct Investing by Institutional Investors

Implications for Investors and Policy Makers

This report, a collaboration between the World Economic Forum and Oliver Wyman, examines the trend towards direct investing in illiquid assets by asset owners, including pension funds, sovereign wealth funds and insurers.

Direct investing is defined in the report as when an asset owner makes the decision to take part in a specific investment. While it's not new, the amount of direct investment increased in the aftermath of the financial crisis and has caught the investment community's attention. This in turn has sparked speculation about the volume and direction of direct investing over the coming years.

The report finds that commitments to direct investing are driven in particular by the size and governance structure of the institution. While direct investing is expected to continue growing steadily, in light of the constraints involved, the report concludes that most of the switching by institutions into direct investing has already happened. The report goes on to examine the ways in which direct investing is expected to evolve in the next few years. Lastly, the report recognises that direct investing has wider implications for the global economy by encouraging a long-term investment attitude and providing stabilizing and counter-cyclical effects on capital markets.

Direct Investing by Institutional Investors