Investing in private markets is expected to grow in 2022, with decarbonisation as a key megatrend along with digitalisation, and expectations of more investment in Asia, according to BlackRock.
BlackRock released its 2022 private markets outlook, in which it outlined five key themes - growth, restart, digitalisation, decarbonisation and Asia.
BlackRock cited statistics from Preqin finding total deployment of capital to private markets was US$2.5 trillion as of December 2021, higher than the previous high of US$1.9 trillion in 2018. BlackRock says they believe "private markets risk premia are still attractive and can offer portfolio resilience" going ahead.
The global fund manager identified the pace of change in sustainable investing in private markets as a lead trend.
"We see a wide variety of sustainable opportunities in markets today," BlackRock said in its outlook. "For example, we think impact investments in under-explored themes such as financial inclusion can potentially tap new sources of alpha across private asset classes."
BlackRock highlighted investments in food security via temperature-controlled supply chain and logistics, innovative technologies dedicated to women's health challenges and energy-transition opportunities as thematics.
"Key to acting on sustainable opportunities over the next two years will be showing materiality and improving the toolkit to measure impact and additionality in investor portfolios," BlackRock said. "With a broad spectrum of capital channelled in this direction, measuring outcomes will be increasingly imperative."
BlackRock also said that exposure to trends including "use of technology across businesses, changes in healthcare and healthcare delivery, new consumption and living patterns is an important element of future private market returns, particularly in a world where forward returns are more challenged."
Forecasting how the world gets to net zero requires a solid understanding of policy, innovation, cost and resilience, which can create opportunities in power, transportation industry and agriculture, BlackRock noted.
Infrastructure specifically will be influenced by what BlackRock calls the 3Ds - decarbonisation, digitalisation and decentralisation.
"The push to decarbonize the global economy requires a massive energy transition from fossil fuels to renewables, not just with the mainstays of solar and wind, but increasingly with carbon capture, battery storage and blue and green hydrogen," BlackRock said. "The digital world continues to transform our daily lives, with online work, shopping, schooling and entertainment markedly accelerated by the pandemic, as robotics and automation deliver genuine productivity gains.
"Moreover, infrastructure services are decentralizing on several fronts, as location becomes less important for virtual work and shopping, and as holdings diversify for resilience and operational efficiency."
The 3Ds also apply to the real estate sector, BlackRock added.