Tell me about the background/history of Iconomi

ICONOMI’s story began in 2016 when crypto was still largely unexplored territory—a fascinating new world but intimidating at the same time. Tim and Jani, the founders, saw an opportunity to bridge a gap, creating a platform that made it easy for people to start investing in crypto without navigating the complexities that often come with it.

That’s how ICONOMI was born. We were one of the first platforms to let people invest and manage their crypto investments without needing to be experts. Our mission remains to make digital asset investments and management simple, secure, and transparent for retail and institutional users.

What is the firm’s offering :

–              for retail clients?

For retail clients, our goal is clear: to make crypto investing accessible to everyone, regardless of their expertise. Users can easily invest in crypto portfolios that automatically index the market or a sub-segment of the crypto market. We’ve worked hard to make the process as straightforward as possible so anyone can manage their crypto portfolio without feeling overwhelmed.

Plus, we offer tools like automated profit-taking and stop-loss features to make the entire experience smoother and more user-friendly. More advanced retail users can also create and manage their own crypto strategy.

–              For institutional clients, including wealth managers and advisers?

We provide robust tools for wealth managers, advisers, and institutional investors to meet the growing demand for digital asset exposure. These include digital assets portfolio management, a white-label platform, custody, trading and reporting tools that make it easy for them to integrate crypto into their existing offerings.

Essentially, we help them unlock a whole new asset class for their clients.

How does the platform work for all types of investors?

The core of the platform works similarly for all investors. We take great care to pre-screen and only list compliant tokens as well as real time monitoring of each token liquidity. That is done in the background, without the users noticing it. Same is valid for arranging a secure custody of all crypto-assets on the platform.

Users focus on creating their own crypto investment strategies, set rules and automation to suit their goals or copy a strategy that aligns with their personal or business objectives. We handle the heavy lifting—like portfolio rebalancing and trade execution—while ensuring full transparency and control. We’re connected to most of the major exchanges, which means that our users get access to the best possible liquidity and prices when it comes to executing their trade orders. We at all times remain independent from trading platforms, as we side with the users.

What do cryptocurrencies offer to retail clients/institutional clients?

The role of cryptocurrencies has evolved significantly in recent years. While they were once seen mainly as a speculative asset class, the industry has matured, and crypto now represents an efficient way to diversify financially.

In essence it offers both segments the same – an opportunity for diversification and a way to mitigate economic uncertainties while appealing to forward-thinking clients looking for modern investment options. Bitcoin stands out of the pack, as it has reached a different status with institutional investors as well. 

Do you actually invest in cryptocurrencies directly?

Me personally? Of course. Up to a certain per cent risk-reward is acceptable, so I invest roughly 10 per cent of my overall portfolio. I am actually quite a conservative investor, maybe a bit biased on crypto.

We also invest in crypto as a company and hold roughly 20 per cent of our treasury in crypto. This simple strategy has paid off very well over the last eight years, and I would recommend that business owners take this opportunity if they have not yet explored it.

What is your offering using ETPs?

–              we don’t offer ETPs

Our offering is even simpler than an ETP. Our platform empowers users to create and manage any kind of crypto portfolio that fulfils the same goals as a crypto ETPs. Automated rebalancing, real time price information, custody, ease of use, transparency and diversification benefits … Everything is inbuild into our platform. On top of all this Iconomi allows a user to create and manage his own investment strategy – in a sense create his own “etp equivalent”. 

We offer tools for asset managers and institutional investors to build and oversee personalised crypto portfolios for their clients. At the same time, individuals can use our curated portfolios to begin their crypto investment journey. This solution makes it easier to include digital assets in modern investment strategies without depending on traditional ETP structures or IT providers.

How safe is an investment in cryptocurrencies for a retail client/institutional client?

Investing via a regulated/registered crypto provider should be safe nowadays. It is crucial to select providers that are registered with the local regulator. If an investor would take the de-fi route, it might get a bit more tricky.

Safety is a top priority at ICONOMI. We know it’s the first thing people worry about when considering crypto investments, exactly because of the nature of the assets. That’s why we’ve built our platform with security at its core. We work with trusted custodians and use cold storage for assets, among other measures, to keep funds safe from potential threats. Our security protocols are constantly updated and audited.

We’ve also ensured our tools are designed to help retail and institutional clients navigate the volatility of crypto markets. Diversification through automated portfolios, trailing stop loss or automated taking profit rules and others make it easier to spread risk and invest with confidence. We offer even more robust solutions for institutions, including compliance-friendly options and detailed reporting to meet regulatory needs.

How is custody managed through your platform?

Users on Iconomi have 24/7 access to all their crypto-assets, while banks still only work until 4 p.m. The majority of the assets are kept in cold storage to increase security. We also employ a multi-custody strategy and work with multiple custody providers. This allows the user to manage all his crypto-assets in one place while at the same time diversifying their custody and lowering the risk by not keeping “all eggs in one basket.”

How do you manage investments in multiple cryptocurrencies?

Our platform is designed for diversification and flexibility. Users can invest in multiple cryptocurrencies by either copying a strategy that matches their goals or managing their own custom portfolio. We offer access to 150 assets, including widely known ones like Bitcoin, Ethereum, and Solana. To limit exposure and enhance security, we make some of the more volatile assets available only through managed strategies.

Have you seen much appetite for financial advisers and wealth managers to offer cryptocurrency-based investments to their clients?

We’ve seen significant interest growth in crypto over the past few years. Also, on our platform, business accounts have grown exponentially since 2022.  There was a lot of hesitation in the early days, but now, financial advisers, wealth managers, and businesses embrace crypto as a legitimate addition to their clients’ portfolios. ICONOMI has played a role in this shift, providing the tools and education they need to navigate these waters. It’s been rewarding to see this adoption grow and to be part of the journey as the financial world embraces crypto.

The launches are flagged with the filing of the Palmer Square EUR CLO Senior Debt Index ETF, focused on EUR and USD denominated AAA and AA CLO debt.  The ETFs will include an active multi-strategy ETF providing similar exposure to PSQO, the NYSE-listed ETF currently offered in the US by Palmer Square.

“The launch of these ETFs in Europe underscores our commitment to delivering cutting-edge solutions in complex investment environments across the globe. It is a natural extension of our global expertise in structured credit and demonstrates our ability to meet the rising market demand,” says Angie Long, Chief Investment Officer and Portfolio Manager at Palmer Square Capital. “Leveraging our proprietary benchmarks trusted by institutions worldwide, these new products offer efficient access to a unique and compelling asset class, affirming our commitment to creating value for institutional and professional investors.”

The firm writes that these ETFs will offer capital preservation by targeting cycle-resilient assets with zero historical defaults, including an actively managed multi-asset credit allocation product offering a single-manager solution to simplify portfolio construction and provide enhanced access to the best relative value opportunities across corporate and structured credit.

 The passive products will create investable access to Palmer Square’s deep understanding and research within the senior tranches of the CLO market, the firm says.

“Institutional appetite for our proprietary European CLO indices and debt products further underscores the demand for these innovative ETFs. Our ability to manage and develop these products entirely in-house ensures operational independence and best-in-class execution,” says Taylor Moore, Managing Director and Portfolio Manager.

Asset owner performance

Only 62 per cent of investors say that their institutions’ investment performance met or exceeded long-term return objectives through the turbulence of 2022-2023. In 2024, however, there’s a slightly more optimistic tone, with the figure estimated to be 88 per cent. While managers in private market asset classes (private debt, infrastructure and private equity) still demonstrated the strongest satisfaction ratings in 2024, satisfaction was significantly lower than in 2022. Investors relayed high satisfaction with active fixed income manager performance, with 83 per cent in investment grade bonds, but only 35 per cent of investors were satisfied with real estate managers – a huge decline compared to 2022.

Investment portfolios

Private markets remain central to investment strategies, with 53 per cent of investors planning to increase exposure over the next 18 months. Infrastructure and private debt are leading areas of interest, capturing 36 per cent and 35 per cent of new allocations, respectively. Notably, interest in secondaries is growing, with 37 per cent of investors boosting exposure as they seek liquidity options within illiquid asset classes. However, satisfaction with private equity managers has dropped significantly from 94 per cent in 2022 to 69 per cent in 2024, suggesting increased scrutiny of GPs.

In private markets, nearly half (47 per cent) of investors expect a reduced ‘illiquidity premium’, expecting this to be lower in 2020-2040 than it was in 2000-2020. Meanwhile, 37 per cent are in the process of boosting exposure to secondaries and more than a quarter of those are new entrants to the space, among other strategic changes.

Equity portfolio diversification is a clear priority, as only 34 per cent of investors expect the largest tech stocks to outperform broader indices in the coming year. Additionally, 34 per cent of investors anticipate more diversification in their equity portfolio in the next one-to-two years across one or more of four lenses: style (22 per cent), size (16 per cent), geography (16 per cent) and stock-level (14 per cent).

Fixed income strategies are gaining momentum, particularly investment-grade bonds, with 22 per cent of investors boosting allocations. In real estate, 62 per cent of investors anticipate a moderate (59 per cent) or substantial (3 per cent) recovery in core real estate over the coming 12 months, following severe dislocation. However, investors’ predictions for property market recovery have no relationship with their asset allocations movements over the next 18 months. Meanwhile, emerging market exposures are declining, with 18 per cent cutting emerging market equities and 11 per cent reducing allocations to emerging market fixed income.

Opportunities and trends

Artificial intelligence continues to present compelling thematic opportunities, with 40 per cent of investors viewing it as a strong investment theme. However, caution prevails, with a predicted market rotation away from large tech stocks. This reflects a growing focus on mitigating tech-related concentration risks through diversified equity strategies and broader AI investments.

Adoption of digital assets and cryptocurrencies remains low, with only 9 per cent investing in them. In 2022 the figure was 8 per cent, and 21 per cent expected, at that time, to have exposure within five years.

Finally, although interest in impact investing is growing, adoption remains gradual. Currently, 27 per cent of investors are engaged in impact strategies, with a further 26 per cent planning to enter this space. 24 per cent of investors will increase exposure to impact strategies. Climate transition remains a significant theme, with 40 per cent of respondents identifying it as a strong investment opportunity. Biodiversity-focused assets are poised for growth, with a projected 200 per cent increase as investors explore nature-based solutions.

Risk management

With 75 per cent of investors emphasising the need to build portfolio resilience, managing risk has become a primary objective. Major areas of concern include geopolitical unrest (54 per cent), prolonged downturns in risk assets (23 per cent), and liquidity risks (19 per cent). Investors are taking diverse approaches, with 22 per cent already using equity overlays and another 9 per cent planning to implement them to buffer against potential equity market corrections.

While investors are more positive on ‘risk assets’ (e.g. equities) than they were in 2022, there is a huge contrast between different institution types: only 4 per cent of DB Pension Funds are underweight risk assets, in contrast with 37 per cent of Insurers. Furthermore, investors are expecting ‘higher for longer’ rates compared to the current economist consensus: the average prediction for the Fed Funds rate at end-2025 is 3.4 per cent, distinctly higher than the 3.0-3.25 per cent figure in an October 2024 Reuters economist poll.

Kathryn Saklatvala, Head of Investment Content at bfinance, says: “The report reveals that in an increasingly uncertain world, resilience has taken centre stage for institutional investors. The focus on managing risks like geopolitical unrest, liquidity challenges, and prolonged market downturns underscores the critical need for robust strategies. From equity overlays to private markets and fixed income, we’re seeing investors actively recalibrate portfolios to navigate these challenges, balancing caution with the pursuit of opportunity in areas such as impact investing, infrastructure, and emerging technologies like AI.”

A report from consultancy bfinance reveals that more than three-quarters (78 per cent) of manager searches deemed diversity as irrelevant. Just 14 per cent believed DEI was significant and 8 per cent treated it as relevant.

These findings appear to contradict claims from 36 per cent of institutional investors who say they would be unlikely to hire an external manager that lacks gender and ethnic diversity.

Martha Brindle Senior Director, Equity at bfinance says: “A consistent large minority of investors have said that they’re unlikely to “hire an external asset manager who lacks gender and/or ethnic diversity. In practice, however, this intent does not necessarily translate into allocators’ manager selection activity, and this may be particularly true in certain asset classes and sectors.”

She adds: “This raises a question for asset owners: what happens when principles meet practices?”

Brindle says there are “various plausible reasons” why investors’ actions deviate from their principles.

“An allocator searching for a manager in a niche strategy area may primarily be concerned with identifying a sufficient number of credible candidates and less focused on diversity than may be the case when the allocator is selecting managers in a more conventional strategy area.”

This contrasts with broad tenders that maximise the universe of asset managers under consideration where DEI is generally seen as more important.

The focus on DEI is driven by various industry and academic studies that support the argument that diversity brings myriad benefits such as reduced ‘groupthink,’ stronger performance and improved risk management.

For example, WTW finds that investment teams in the top quartile of gender diversity outperforms those in the bottom quartile by 45 basis points a year.

Yet Fiyin Kosoko Senior Associate, ESG and Responsible Investment at bfinance, says the global asset management industry is “still struggling on this subject”, especially in key portfolio management and leadership roles.

In bfinance’s research, only 38 per cent of asset managers reported that more than 30 per cent of their management personnel are women. Just 11 per cent report that more than 30 per cent of their management personnel are from ethnic minorities.

“While there have been clear signs of progress, such as improved transparency on gender pay gaps, disparities relating to gender and ethnicity remain very much in evidence,” he says.

A separate survey published by Reboot this April finds that more than one in five (21 per cent) UK fund managers say that a lack of ethnic diversity in their workforce has stifled their ability to win over new clients.

The survey also found that more than two thirds institutional investors believe that employing people from ethnic minority backgrounds when selecting funds or awarding mandates will become more important for investment firms over the next five years.  

Kosoko says institutional investors should consider other facets of diversity such as socioeconomic background and educational profile, when assessing diversity but concedes these aspects remain less measurable.

Kosoko warns that DEI policies may be “largely symbolic and superficial”, and advises asset owners to look at mentoring programmes, recruitment practices, employee engagement surveys and strategy-level investment practices which give deeper insights into diversity.

Five pension funds – AP7 (Sweden); CDPQ (Canada); the Church of England Pensions Board (UK); HESTA (Australia); and USS (UK) – are leading the initiative which calls on governments to set new national targets; implement mandatory disclosure on nature for companies; establish regulation that addresses the five drivers of biodiversity loss; and develop and scale financial mechanisms for nature.

Laura Hillis, Director of Climate and Environment at the Church of England Pensions Board, says: “The tragedy of biodiversity and nature loss will not be solved by waiting for the market in the absence of strong environmental policies and regulations. For us as stewards of long-term retirement savings, bold action from government holds the key to protecting long-term prosperity and wellbeing for our beneficiaries.”

The coalition demands ambitious national targets, nature-related transition plans and commitments to halt and reverse biodiversity loss, with a focus on transformation of key sectors, stopping deforestation, and protecting and restoring critical ecosystems.

The investors also call for mandatory disclosure regulations for companies with material nature-related impacts or dependencies, as well as nature-related transition plans, with metrics strongly tied to biodiversity outcomes.

Thirdly, they want to see regulation that protects nature and biodiversity for all sectors that contribute to the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services’ (IPBES) five drivers of biodiversity loss.

And finally, they want governments to invest in the development and scaling of financial mechanisms to protect and restore nature and biodiversity.

The demands come amid the Convention on Biological Diversity (COP 16) Summit held in Cali, Colombia which aims to mobilise private and public finance to protecting the world’s ecosystems.

Ahead of the summit, Colombia’s Environment Minister and President of COP16 Susana Muhamad said that the event would ensure “biodiversity is [seen] as important, complementary, and indispensable as the energy transition and decarbonisation.”

Bertrand Millot, Head of Sustainability at CDPQ, says the summit must build on progress made at earlier biodiversity summits.

“Since COP15 and the 2022 Kunming-Montréal Global Biodiversity Framework, biodiversity is becoming an increasingly relevant factor in the financial sector. It is crucial to bring together stakeholders to support the transition to a more sustainable and resilient world and we need more proactive policies from governments – and greater collaboration between public authorities and private sector players – to accelerate progress in biodiversity preservation.”

Research from Morningstar reveals global assets held in biodiversity open-end funds and ETFs more than doubled over the past three years to USD3.7 billion, boosted by product development. There are 34 such funds on offer, all domiciled in Europe.

However, the research notes that despite its rapid growth, the size of the biodiversity fund universe is dwarfed by the USD520 billion climate fund market.

Further, biodiversity funds have underperformed, on average, “but showed resilience in the 2022 market downturn”.

Hortense Bioy, Head of Sustainable Investing Research at Morningstar Sustainalytics, says: “It’s still early days for biodiversity investments. Strategies to execute on biodiversity objectives have proved difficult to develop, partly due to a lack of reported corporate data and standard metrics and because biodiversity is at the intersection of other more easily investible and better-known themes such as climate change, water, and the environment.”

However, Bioy adds: “Biodiversity is an emerging topic that investors can no longer ignore both as a risk factor and as an opportunity, particularly in the face of a changing climate and declining global habitat.”

For the third year running, BlackRock’s annual report shows a majority of insurers are planning increased investments in private markets, with 91 per cent of all respondents saying they will do so within the next two years. This figure increases to 96 per cent for APAC and 96 per cent for North American insurers.

The report tracks insights from 410 insurance investors surveyed across 32 markets, representing nearly USD27 trillion USD in assets under management.

Mark Erickson, Global Head of BlackRock’s Financial Institutions Group, says: “We’ve seen rapidly accelerated demand for private markets among insurers in recent years, given these investments’ dual benefits of diversification and increased income generation.”

Navigating risk: finding the right investment partner

With 2024 projected to be the biggest election year in history, insurers see political uncertainty impacting macro risks, citing regulatory developments (68 per cent) and rising geopolitical tension and fragmentation (61 per cent) as their top concerns.

Additionally, interest rate risk (69 per cent) and liquidity risk (52 per cent) were highlighted as the most serious market risks for insurers. Despite this outlook, 74 per cent of insurers have no plans to change their current risk profiles. Notably, many insurers reported they benefit from partnerships to augment their internal expertise for risk evaluation as well as portfolio construction. According to 40 per cent of survey respondents, an investment partner who understands both their insurance business and its operating model is fundamental to the success of insurers’ strategic priorities.

Asset allocation: a balanced approach across public and private assets

Within public markets, 42 per cent of those surveyed planned to increase allocations to government and agency bonds. Inflation-linked bonds are also a priority, with 33 per cent planning to increase exposure, given nearly half of insurers (46 per cent) identify inflation as a major macro risk. Additionally, 44 per cent of respondents are looking to increase their allocations to cash and short-term instruments for liquidity.

In private markets, insurers report they are looking to increase allocations to private debt across multiple categories, including opportunistic private debt (41 per cent), private placements (40 per cent), direct lending (39 per cent), and infrastructure debt (34 per cent). As the scope of private debt has expanded to encompass a wider array of lending opportunities, BlackRock’s report indicates this asset class can support insurance investment objectives for those needing long-term assets to support long-term liabilities, as well as increasing investment income through illiquidity rather than other investment characteristics. In addition, over half of insurers (52 per cent) reported they will increase allocations to multi-alternative investments for greater flexibility and customisation.

Olivier Van Eyseren, Head of the Financial Institutions Group (FIG) for BlackRock in EMEA, says: “Insurers face unique challenges when evaluating strategic asset allocation to alternative investments, including regulatory issues, liquidity needs, and higher capital charges. An important part of our work with insurance clients is helping them navigate these short-term complexities while working toward the best possible long-term portfolio outcomes.”

Seizing the moment for clean energy infrastructure

Nearly all (99 per cent) of insurers surveyed have set a low-carbon transition objective within their investment portfolio, with 57 per cent of respondents citing management and/or mitigation of climate risks as a top motivation for doing so. Additional drivers for setting low-carbon transition objectives include responding to stakeholder and beneficiary interest and fulfilling regulatory requirements.

To support their low-carbon transition strategy, clean energy infrastructure such as wind and solar (60 per cent) and technologies such as batteries and energy storage (60 per cent) were identified as the top two thematic areas that insurers plan to target. In addition, 66 per cent of respondents stated that they have more conviction now towards investing in the low-carbon transition than they did one year ago.

Leveraging innovative technology

In an increasingly volatile and complex macroeconomic and regulatory environment, insurers recognise the importance of investing in technology. Integrated asset allocation (63 per cent) and asset liability management (61 per cent) were named as strategic priorities for their technology platforms.

Regulatory capital integration (51 per cent) was also cited as an area where technology could add value. As insurers look to continue their deployment into private markets, 53 per cent of respondents view private asset modeling as an additional area to leverage technology, the firm says.

The firm writes that the Russell Investments Global Private Credit Fund will employ a multi-manager approach, utilising Russell Investments’ 50 years’ of private markets research expertise and open architecture structure to invest in selected top-ranked managers across the full private credit spectrum.

Via this approach, the firm writes that it will provide its clients with a single point of access to a highly diversified range of private credit exposures. This will include North American and European asset-backed and direct lending allocations as well as special situations, real estate debt, credit risk transfers and royalty income opportunities on a more tactical basis.

Alongside the significant diversification delivered by the Luxembourg-domiciled Fund’s portfolio, investors are also expected to benefit from its evergreen structure, which may offer quarterly liquidity up to 5 per cent of NAV after the investment period.

The Fund starts with a complementary mix of seven specialist portfolios managed by underlying General Partners (GP) strategically determined through the firm’s rigorous, ongoing research process of more than 1,000 private credit products, the firm says, adding: “As the Fund grows, it will continue to diversify”.

It will seek to deliver an annualised net return of 8 per cent over a market cycle and will be available to professional investors based in the UK.

The firm writes that the launch comes at a time of significant appetite for private markets exposure, with inflows of approximately USD200 billion between January 2021 and January 2024. “This highly attractive environment has brought a more diverse range of investors into the asset class, encouraging improvements in the quality and liquidity of GP vehicles, and the development of more innovative solutions to maximise the opportunities available from this asset class”.

Commenting on the launch, Keith Brakebill, Senior Portfolio Manager, Private Credit at Russell Investments, says:  “Private credit has been an asset class ‘in vogue’ for some time, with investors keen to access the improved returns and lower drawdowns on offer relative to those available via public markets. However, investors have historically been limited by their ability to access the asset class effectively and have had to do so by focusing on specific sub-segments rather than via a broad exposure. In launching our evergreen Russell Investments Global Private Credit Fund, we are able to offer a compelling solution to investor needs, allowing clients to access a diversified portfolio of private credit assets in a single investment which can generate income and long-term capital appreciation.”

 Jim Leggate, Head of EMEA at Russell Investments, says: “This launch reflects our continued commitment to provide all clients across the institutional and wealth management space with institutional-quality solutions to meet their long-term goals. There are clear advantages for investors to ensure they have adequate exposure to private credit assets which can be employed as a return enhancer, risk reducer or a combination of the two depending on their individual requirements. Our scale and research capabilities leave us well positioned to provide diversified exposure to best-of-breed managers within this evergreen structure that aligns with investors’ liquidity requirements.”

The survey, which gathered insights from over 100 senior decision-makers at banks, wealth and asset managers, insurers, and financial sponsors, highlighted the importance of AI with 81 per cent of financial institutions stating they view it as a business opportunity, a significant rise from 56 per cent in 2023.

The report shows that nearly half (46 per cent) of financial institutions have established dedicated teams to explore AI use cases, while two-fifths (39 per cent) have partnered with firms possessing AI capabilities. Additionally, 15 per cent have already collaborated with firms specialising in AI.

When examining the opportunities AI provides financial institutions and whether benefits are already being felt, three key areas emerged from the survey. These were:

Improved productivity: 62 per cent see it as an opportunity while 32 per cent are already seeing the benefit

Competitive advantage: 61 per cent see it as an opportunity while 22 per cent are already seeing the benefit

Greater insight on customers: 69 per cent see it as an opportunity while 18 per cent are already seeing the benefit

For other priorities, such as driving business growth and enhancing client experience, many respondents have yet to see significant benefits. However, over two-thirds (69 per cent) of institutions expressed confidence in their ability to implement AI and capitalise on its potential.

Lisa Francis, Head of Institutional Coverage, Lloyds Bank Corporate & Institutional Banking, says: “This year’s survey highlights a significant boost in AI investment among UK financial institutions, reflecting its elevation to a board-level priority. The focus has shifted from merely exploring AI to making practical investments and applications. As a result, many institutions are already experiencing the benefits, such as enhanced productivity, deeper customer insights, and a stronger competitive edge. While the full impact across all business areas is yet to be realised, this will evolve as institutions continue to innovate, test and learn.”

Rohit Dhawan, Director of AI and Advanced Analytics at Lloyds Banking Group, says: “Artificial intelligence is rapidly reshaping the financial landscape, and what we’re seeing is just the beginning. Growing investments from financial institutions and increasing partnerships in AI demonstrate a clear commitment to leveraging this technology. From automating complex processes to unlocking insights that improve decision-making, AI is enabling institutions to reimagine what’s possible. We are witnessing an exciting period of transformation, and it’s inspiring to consider the advancements that lie ahead for the sector.”

The bfinance quarterly Manager Intelligence and Market Trends report published this August reveals that while private debt deployment activity is inherently more robust than other illiquid asset classes, due to the more frequent need to recycle capital into the asset class, “investors have also noted the apparent resilience of direct lending strategies and healthy spreads helped, in part, retrenchment in bank lending”.

The report also finds that investors who entered private debt in the 2015-20 period and who are now seeking to diversify and develop these portfolios, are “exploring dedicated exposure to niches such as healthcare”.

Kathryn Saklatvala, Head of Investment Content at bfinance, said: “While private market fundraising has slowed slightly, demand for private debt is strong and appetite for real estate is increasing.”

Across the world multi-billion-dollar pension funds are opting to diversify their portfolios with allocations to private debt.

The GBP31.6 billionLondon CIV, the local authority pension pool for the London boroughs and the City of London, is due to launch a new private credit strategy in the third quarter of 2024. The latest tranche in the local authority pool’s private debt strategy will allocate 70 per cent to senior direct lending and up to 30 per cent to asset-based lending.

This April the AUD139 billion Australian pension fund UniSuper has increased its portfolio exposure to private credit.

The fund now holds approximately AUD1 billion in dry powder, which could potentially be invested in the sector.

Meanwhile this July the SOKA-BAU, a German organisation overseeing two pension funds for employees in the construction industry, has committed 5 per cent of its total portfolio to private debt.

And this summer a survey from the Pensions and Lifetime Savings Association’s Local Authority Conference found 36 per cent of Local Government Pension Scheme (LGPS) funds are planning to increase their allocations to private credit in 2025.

The boom in private markets allocations also offers new business opportunities for third party providers supporting administration and fund services.

At the start of the year the GBP56 billion local authority pension pool LGPS Central, announced a “strategic collaboration” with State Street as the provider of fund administration services for its private markets products.

State Street will initially support 13 funds managed by a combination of LGPS Central and its third-party managers in the form of fund administration, registration services, investor services and regulatory reporting services.

Speaking at the time of the appointment, Head of Investment Operations at LGPS Central, Neil Wain said: “This collaboration promises to bolster operational efficiency and further strengthen governance while providing long-term, scalable solutions for our private markets offering. In addition, State Street will provide us with a portfolio monitoring solution that will enable deeper, more sophisticated analysis using online data delivery tools, equipping us with the critical information that it needs – when it needs it – to support effective decision-making.”

The global study with small and micro-cap fund managers in the US, Canada, Europe, the Middle East and Asia with collectively USD82.4 billion assets under management, found that 76 per cent of respondents anticipate the level of exposure to small and micro-caps from institutional investors to increase over the next six to 12 months. One in three (34 per cent) fund managers believe allocations could increase by 25 per cent or more.

The findings also reveal that 83 per cent of fund manager respondents expect retail investors to increase their allocation of small and micro-caps over the next six to 12 months. Over half (52 per cent) of respondents believe that the allocation could increase by more than 25 per cent, and one in eight (12 per cent) believe that exposure to small and micro-caps could rise by more than 50 per cent.

One in three fund managers describe the current level of exposure from institutional investors to both small- and micro-caps as being underweight, with 21 per cent of respondents describing the allocation to micro-caps as being “slightly underweight” and 11 per cent describing it as being “extremely underweight”. Institutional investors’ current level of exposure to small-caps and micro-caps is described as being overweight by 4 per cent and 23 per cent, respectively. A similar picture is seen with retail investors, with fund managers describing this group’s allocation to small-caps and micro-caps as being underweight (32 per cent and 27 per cent, respectively) and as being overweight (17 per cent and 13 per cent, respectively).

Brandon Robinson, CEO of Horizon Aircraft, says: “Our research indicates that one third of fund managers believe that exposure to small and micro-caps by both institutional and retail investors is lower than it should be. However, with forecasted interest rate cuts and market conditions set to improve, fund managers are anticipating that investors will be looking to significantly increase their allocation to small and micro-cap stocks.

“As the economy rebounds, small and micro-cap companies can have a higher growth potential than large-cap companies due to their smaller revenue bases and their agility to capitalise on opportunities. This has historically made them more attractive to investors who are driven by the potential for high returns and greater earnings acceleration in the next 12 months.”